Good morning, and welcome to the Galliford Try Holdings plc Investor presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll.
I'd now like to hand you over to Bill Hocking, CEO. Good morning to you, sir.
Good morning. Thank you very much for the introduction. Good morning, everyone. I'm Bill Hocking, Chief Executive. I am here with Kris Hampson, CFO.
What we thought we'd do morning this is run fairly quickly through the presentation. You may have already viewed it on the web. So go through that in a fair bit of speed, and then we go straight to questions, I think, is where the real value is.
So a quick agenda there. Some highlights, a bit on strategy. Of course, we'll do the financial overview and then a bit on where we're going in the future.
So what do we do? For those of you who aren't familiar with us, I'm not going to go through each of these, but you can read it yourself. We do the social and economic infrastructure this country needs. And we build new infrastructure, we improve existing infrastructure and refurbish old infrastructure across all of those sectors.
So just a little bit of explanation. Top left there, environment, that is 99% water and wastewater, and I'll come to that in a bit more detail later on. Defense is around single living accommodation and this buit infrastructure for defense establishments. Health is self explanatory. Although we don't do the big one-off hospitals, we do smaller new wings and new acute centers and so on in existing hospitals. We don't do the big one-offs.
Infrastructure is predominantly roads at the moment, but we're venturing into energy as we speak. Education is what it is. Lots of schools, custodial and judicial prisons and immigration detention centers and the like. Affordable homes, the picture there is a block of flats and that's because our definition of affordable homes is mid-rise blocks of flats for social providers. A bit on that later.
And then obviously, commercial development and so on, private rental sector, again, blocks of flats essentially and then facilities management. So that's a very quick snapshot of what we do.
And this is how we organized. So we trade as Galliford Try in England and as Morrison Construction in Scotland. And we are split across those 4 divisions, as I said, broadly earlier on. So building sectors are on the left-hand side.
We've got special services businesses in the middle there, which is broadly building-orientated special services, the Infrastructure, which is highways and water. And within water, we have design and build, which is asset creation.
We have design services, which is what it says on the [ tin ] really. And then we have a new capital maintenance capability and water technologies or a number of specialist manufacturing businesses of high-tech kit in the water industry.
A quick snapshot of some of our clients you see there, all of the big water companies in the U.K., all of the big public sector bodies and a number of private sector clients and councils and so on, as you'd expect.
This slide is important, I think, for people to understand. On the left-hand side, there's what we call our engine for sustainable growth. And it's the philosophy of how we run the business.
So we start in the middle there with 4,300 now very good people. And we put around those people, on the left-hand side, a really good process of how we run the business and how we run our risk management process and our attitude to risk.
So the BMS, what we call the BMS, the business management system is how you do stuff around here in Galliford Try. And the risk management side of it is being very selective about what we do and what we don't do for our clients. Bear in mind that the vast majority of what we do is in long-term frameworks, which has evolved over time.
So being very selective and having a very robust risk process means that everything in the top [ round ] there, our order book is a high-quality work that we can do in the right geographies with the right clients, the right supply chain, et cetera, day in and day out with a high degree of predictability and consistency, which is on the right-hand side. And that means that, that further strengthens our already strong balance sheet and so the real terms.
So that's the simple philosophy of how we run the business. Very selective about our work gives you a high-quality order book, which means you perform, which means you strengthen the balance sheet and so on.
A quick overview of our strategy to 2030. Our original strategy went to 2026, and our plan was to be at GBP 1.6 billion and 3% operating margin in '26. In '23, actually, we are already ahead of that. And last year at the Capital Markets event, we extended our strategy out to 2030.
So you've seen the half-year results for yourselves. And if you -- and you've heard our confidence in the outlook for the full year. And if you extrapolate that, what our original 3% in '26, we are still on track for that. So we were at 2.7% operating margins in the first half, and we're on track for 3% in the next financial year.
On route to that more than GBP 2.2 billion at 4%. And I think it's important to say more than GBP 2.2 billion because we are more margin focused than revenue focused. We're big enough, we've got plenty of critical mass. And so if the revenues go GBP 2.2 billion, that's fine, but it's the 4% that's important to us.
And then within the strategy, there's 4 main streams in the top box there. So starting from the left-hand side, we continue to grow revenue and margin in the big core businesses, which is building about GBP 1 billion; highways and infrastructure about GBP 350 million; and water, probably about GBP 500 million at the moment. And growing those businesses through the strategy period, both in revenue and in margin up to about 3.5% we reckon. So that remains the core, the critical mass of the business.
Then in parallel with that, we grow our special services business, which are all higher-margin, higher-tech businesses in adjacent markets. And by adjacent markets, we mean markets that we know and understand.
So for example, we want to move into the capital maintenance of water and wastewater treatment works. At the moment, we design them, we build them, we commission them, but we don't do the maintenance. So obviously, we understand them very well. And going into the maintenance market isn't a huge step for us in terms of understanding. So that's what we mean by that.
And we're also going to reenter the affordable homes market. So when we sold the housing businesses back in 2020, there was a restrictive covenant for a few years on us not playing in that market. That's finished now. So we're going back into the market. It's a huge market, and it's a core skill set of ours, building blocks of flats, essentially.
So we're going back in there. We've reestablished the team. We're reestablishing ourselves on the various frameworks, and we're pretty much where we thought we'd be at this moment in time. We expect revenues to start coming through next year with a fairly sensible target through to 2030 in terms of our growth in that market.
And then finally, we leverage our geographical and client footprint across the whole of the U.K. So we work -- we've got offices from [ Inverness ] down to Plymouth and all points in between, and we work for clients across that whole geography.
And there's an opportunity for us to sell more Galliford Try services to existing clients across that geography, more internal trading and more cross-selling. So that's the emphasis on the fourth box there. And if we do all of that, then we continue to generate growing shareholder returns.
I'm just looking at the questions there. I think we'll pick up those questions as we go through. And so I'm not ignoring them, we will pick them up a little bit later. Right. So that's the strategy through 2030, and we're on track. We're making good progress, as you saw in the half-year results.
So we asked what drives the continued revenue growth of the business. And here it is in a nutshell, aging social and economic infrastructure. Everywhere you look, there's infrastructure that needs to be replaced, renewed, made bigger, et cetera, et cetera. And that's exacerbated by population growth and climate change and -- where -- I mean, climate change across the country, of course, but population growth and demographics change all the time.
So those are the key drivers of revenue growth, as well as our leading position in frameworks and sectors. For example, in AMP8, I'll come to you in a bit more detail later, we've had a really good work-winning session running into AMP8, and that's given us a fantastic revenue position for the next decade, I'm going to say. And then as I said earlier on, expansion into adjacent markets.
So those are the key drivers of revenue growth in the business. And then margin growth, how do we continue that trajectory that you've seen over the years? And Kris will come to in a minute.
Well, the two key things on the left-hand side there is that the game has changed dramatically in the big construction markets. So all the big clients, be it public, be it public sector, be it regulated sector, be it private sector; are procuring in a far more mature, responsible way, which means that they're procuring for quality over cost.
And long-term relationships, long-term collaboration, valuing the balance sheet, for example, valuing our social value credentials, our safety credentials, our carbon credentials; all those sorts of things come into the procurement cycle, and I'll come to that in a bit more detail later on.
But that attitude alongside far more robust attitude to risk and being very selective about what we do, both in Galliford Try and across the industry actually, is driving margins and the whole industry in the right direction.
And in a nutshell, the government and the big clients have realized through various pretty high-profile failures over the years that -- I've gone blank. What's happened here? -- sorry, various high-profile failures over the years that they need a sustainable construction business or industry, should I say, to do all the huge amount of stuff that we need to do in this country to sustain the built environment.
And then there's a whole lot of smaller things that [ address ] to the mill, quality, getting things right first time, we do that through modern methods of construction at the bottom there, more off-site manufacture, building more things in factories and assembling them on site.
Digital tools that allow us to build whatever it is in virtual reality and build it half a dozen times in virtual reality before we do it for real, which means we save -- we can debug the designs and so on, and we save money by not -- by reducing the amount of rework and so on.
The high-quality supply chain is really important. We look after our supply chain. We pay them, on average, in 26 days. So they like working for us, they like the strength of our balance sheet. And that means that we attract the best supply chain, which means we will perform and everyone is a winner.
And then those increasing capabilities, growing those higher-margin adjacent market businesses faster. And at the end of the day, as we grow, the overage leverage increases as well. So that's what drives the margin growth, in a nutshell.
And over to Kris for some of the numbers.
Good morning, everybody. I'll just take you through the numbers. We've got a couple of questions on the numbers as well. So I'll try and weave those answers in.
So really strong revenue growth in the period at the group level, up nearly 13% to GBP 923 million, so strong. Where does that come from? Well, it's come from our core businesses and the specialist businesses in there. So building is up nearly 5%, really strong performance across the building sector. Bill has talked about those sectors, but prisons and custodial going very strongly, schools going very strongly, defense going very strongly. So all in all, really good continued progress in that space.
Infrastructure, which, as Bill said, is highways and also water; has gone very, very strongly, up nearly 25%. Two elements in that. Roads going very strongly, some big projects getting off the ground. So that's really important for the highway side.
And then in water, AMP7, which finishes in 2 weeks from today; is going great guns. It's really going [ helpful ] actually. So that's really strong. So we're very, very pleased with that. AMP8 starts just in 2 weeks' time, and so we're ramping up.
Historically, we've seen a dip, but we haven't seen AMP7 tail off. So that's why the first half has been particularly strong in there. So -- and we're ramping up for AMP8, and we'll see how that goes. But of course, there's only 3 months of AMP8 in our water sector in FY '25. So we'll see most of the improvement for AMP8 in next year.
In terms of how we feel the full-year revenue numbers and so on, if you read our announcement, we've guided -- we've put some guidance in that. But we're expecting broadly 50-50 revenues and profits between the 2 halves. So we expect to continue the trading trajectory into H2. And as Bill said, we've guided to stronger numbers for the full year on that outlook.
Turning to profit. What's really pleasing to see for Finance Director is that our profits are growing faster than our revenue. So our adjusted operating profit is up nearly 26% to GBP 17.7 million. And again, that's across all of the divisions or the big divisions. So building terms, 5% of revenue growth to 17.9% profit growth with a 29 basis point improvement in margins to 2.7%.
Infrastructure does the same, 25% revenue growth to 32% profit growth and again, 2.7% margins, that's up 15 basis points, which overall takes the group up to 2.7%. We were 2.5% at the full year and 2.5% last year, so up 24 basis points for the total group. So strong revenue growth turning to strong -- turning into profit, but also improved margins.
Investments in there, you'll see is just a slide, it's a lumpy business. Last year, we had the financial close of our first PRS scheme, Bill will talk a bit more through the progress on that in a minute, but that first closed.
And depending on when that -- those financial closes happen, if they happen on the 31st of December, they're in one period, 'if they happen on the January 1, they're in the second period. So they can be a bit lumpy. So it's effectively a non-repeat of what happened last year. So all in all, strong revenue growth, strong profit growth and strong margin growth. So we're very pleased with that.
Moving on to the balance sheet. The number on the bottom right-hand corner, ironically, is the one we're most keen on. That's the average month-end cash, really strong progress in the average month-end cash. So we're GBP 155 million in the 12 months to June. That's moved up to GBP 176 million. So we're taking that revenue, we're turning it into more profit, we're turning it into cash. That's really good news.
A little bit of a tailwind in the GBP 176 million, I would say, just we had a corporation tax refund of GBP 10 million in early August. And from October, we started handing that back through the share buyback. But on an average monthly basis, it's been set on our balance sheet for most of the first half. So a little bit of a tailwind of GBP 5 million or GBP 6 million there. But even taking that away, really, really strong growth.
And the balance sheet remains incredibly strong. So the average cash, the period-end cash of GBP 210 million, a little bit up on last year. We have no debt. We have no pension liabilities. We have our PPP assets worth about GBP 40 million. It gives about GBP 3.6 million of annualized interest, and they're highly marketable and highly liquid.
So we're really pleased to have those on our balance sheet. They are a differentiator. Investors, customers, colleagues, suppliers all really, really rate the strength of our balance sheet because it gives security, consistency and predictability that we'll finish jobs, right, and we can pay our bills.
And a little bit of housekeeping as we prepare for growth for those 2030 targets, we put an [ RCF ] in housekeeping positioning, preparation for the future. It's on a very good commercial terms, and we see it as a voting confidence in us from the credit sector and in the industry. So really, really pleased, extra strength on the balance sheet, and we continue to move forward.
Capital allocation model, you can see there, we have a very clear capital allocation model. Firstly, we're going to invest in ourselves. We believe we can generate stronger returns in doing so. So that will be organically. As Bill talked about, we've got to grow our specialist businesses, grow them across the U.K. We'll be investing in new branches, not physical properties. We have those physical properties, but in the people, et cetera, to grow those businesses. So internal operational organic investments.
And then M&A, we've done 4 M&A deals over the last 4 years, adding at date of acquisition, about GBP 125 million. Those deals are margin accretive. They're higher margins, they are growing, they are being integrated. So we have a very clear message there.
And I think in the appendix of the slides, we put a slide on our M&A investment strategy. There will be strategic hurdles. Bill talked about adjacent markets. We'll be very specific about what we want to buy. They will be buying capability and technology. We're not chasing revenue and volumes. So we'll buy there, and they will have to meet our strategic hurdles and they will have to meet our financial hurdles, obviously. So we will -- we are looking to that.
Acquisitions are not in those strategic targets that Bill talked about, the 2.2 -- more than GBP 2.2 billion of revenue and 4% margins. So where we define those, they will be accretive to that. So a clear view on what we want to do internally and then a clear view externally.
Our dividend cover is about 1.8x. So that's pretty strong, that's the strongest in the industry. How do we get to that 1.8x? It's effectively we return all of the interest income from the PPP assets at GBP 3.6 million, GBP 3.7 million and then about half of our adjusted PBT. So we have a very clear, sustainable ordinary dividend, and that's our strategy going forward.
And then if we have excess cash, we will return that excess cash. We do that -- we've done that in two ways over the last few years. We've done share buybacks and a special dividend. Those, to date, have been closely tied to one-off returns that we've had. So we talked about the GBP 10 million corporation tax refund. We've given that back as a share buyback.
We have trend lines that we talk about for what we think is excess cash. So we take that average month-end cash, the GBP 176 million that I talked about on the previous slide, we express that as a percentage of our revenue. At December, that's about 9.7%, and our trend lines are 8% to 12%. So we are bang in the middle of those trend lines, exactly where you'd expect us to be.
Our view is as we go forward and we generate higher profits, we will move up that. And at that point, we will look to return excess cash. And just on the right-hand side, it's worth pointing out, we have delivered GBP 84 million of shareholder returns, GBP 46 million is the ordinary dividend and the balancing number through GBP 25 million worth of share buybacks and GBP 12.5 million.
And worth just stressing that I repeat the point, the strong balance sheet is critical. It's in that wheel that Bill talked about, the strategy wheel is how we drive the business. It's important to our customers, it's important to our colleagues, and it's important to our clients. So we have a very clear capital allocation model. We've demonstrated that's what we do.
And if I go to the next slide, we have a strong view of going forward. We've delivered 250% TSR over the last 4.5 years. How have we done that? We've got a clear strategic model. We are sticking to that strategic model. We've built a track record now 9 consecutive halves of growth. And we also have strong macro factors, Bill talked a little bit about those in the revenue growth slide, we'll talk about a bit more going forward.
And so our view, actually, if you put that strategic track record together and the macro factors, there is as much road in front of us as there is behind us. So we fully intend to go and do that again over the strategic period. So I think that's one of the key messages. There's really, really strong visibility of revenue, profit in front of us, and we feel confident about the outlook and the momentum.
Bill, back to you.
Thank you. I'd just make the point on that slide, that order book of GBP [ 3.9 ] billion is a conservatively run order book. We run it on a conservative basis.
Okay. So I mentioned modern methods of construction. What does it actually mean? Well, you can see on this photograph here, the building you see on the right was previously on the ground on the left. Now to make this work, of course, you need a huge amount of very detailed design and planning and logistics and expediting and so on because the precise part on the ground there needs to arrive on site at a precise time to be lifted into place in the right order.
So it's all pretty military logistics there. But getting it right, which we do, this is the fourth or fifth building we've done in this manner; it really works. So that photograph you see there on the right-hand side was taken about 3 weeks ago, and we're already 3 or 4 storeys higher than when we took it because we're going up at a rate of 6.5 days per floor at the moment.
And those units go in with a glass in them, the balconies where there are balconies, et cetera, et cetera. They all go up in a [ one r], and it's a really, really efficient way of building a high-rise building.
We spent a lot of time on people. We've got a plan to obviously retain our very good 4,300 very good people and to attract more good people to the business as we grow. Very proud of the fact that our churn rate -- voluntary churn rate is probably half the average in the industry. Our employee advocacy score is 87%. So 87% of our people are strong advocates of our business.
And this year, we're #1 for apprentices, #2 for graduates in the civil engineering sector. Last year, it was the other way around actually, but I'll take either. So a huge amount of effort on attracting good people to the business and keeping our existing good people.
Our ESG measures, I won't go through all of these everyone, but our ESG measures are really fundamental to us. We focus a lot, obviously, on people, on carbon, on safety, as you'd expect in the business of this nature, on our social value credentials and things like that.
So we measure all of these things. And the key message here is that all of these measures help our business to improve. So we don't measure these for any ESG reason. We measure these things to help us improve the business, and we do them anyway, even if there was no ESG reporting, I think, is the important thing to show. But we are AAA MSCI rated. You see on the bottom, there's all the accreditations and so on down the bottom.
This is a really important slide, everyone, because I get frustrated sometimes that people still think that the construction industry or the big Tier 1 construction companies still bid against each other for work. And that's not the case. We bid against each other to get places on frameworks. And once we're on those frameworks, there is very little further competition. In fact, in water and highways, there's no further competition.
So we get allocated projects. We then go and design those projects. We are paid to design the projects. We build up the target cost or the price, whatever it might be. We build in risk and contingency and inflation, all those things and our fee, and then we agree it.
So on the left-hand side there, you can see that 99% of our order book is made of some sort of negotiation, is built up through some sort of negotiation. On the left-hand side in the red there is mainly infrastructure and water, and all of that work is done on a target cost reimbursable basis.
So again, in the water industry, we generally -- once you want to place in a framework, and we've been very successful in AMP8 and in AMP7, by the way; you get generally a geographical patch, and we do all of the work within that patch. There's no further competition. So all of the work there is negotiated in one way or another.
On the right-hand side in the gray is from the building sector. And those jobs typically end up as a fixed price, but you arrive at that fixed price through negotiation and without any competition. So again, you build in all of the contingencies that you need to. And I think that's a really important message for prospective investors, is that we do not hard bid any of our work.
The 1% you see there where -- by the way, that's not quite right because the 1% you see there is hard bid, so lump sum fixed price, that is all in our smaller business units in the north of Scotland, where this is actually a more appropriate procurement method because the jobs are smaller, typically GBP 1 million to a couple of million pound-size projects.
And so you don't have the administrative burden of the target cost, cost reimbursal type of thing. And actually, those 2 business units are our most profitable 2 business units, as it happens.
So it proves that you can -- if you've got the discipline to put in the right price and to stick to your guns, then it can be a profitable and sensible procurement route, but the vast majority of the industry has moved away from that now, especially in the big [ stuff ]. So that's a really important point, everyone.
Moving on to the order book. GBP 3.9 billion, as I said, I won't go through all the detail there, you can see it yourself. Roughly 90-10 public regulated and private, and that [ wanes ] a bit, depending on timing, but that's broadly what it's going to be.
The important things for me are the work secured numbers. So at the half year, so at December, we had 98% of this year's work already secured. So you'd like to think we're there by now. And at December, we also had 81% of next year's work already in hand, and that will be higher now. So very good positions. And actually, as we speak, we're somewhere around 50% for full year '27. So we've got a really good forward visibility of our work.
Just before we move on, there's a couple of questions on the right. I think it might be worth taking this one. The first one is, how is the ISG impacting the business or the failure of ISG? And how is that impact here, which I think goes with some of this. And then, our sort of recent government policies about infrastructure investment. It might be worth just touch on those as what's in and what's out and how we feel about it.
So ISG was another [ central ] lesson to clients that you want to contract with companies with a good balance sheet, a good reputation and a good attitude to risk because when a company -- and by the way, I take no pleasure in the failure of ISG, we've actually employed quite a few of their people.
But it's a disaster for clients when a contractor goes bust halfway through and you got a half built whatever it is you're building. And to get it handed over to somebody else and built will, a, cost you a lot more and take a lot more time. So it's not good for anybody.
So on the back of ISG's failure, we have picked up a number of projects in the custodial sector and a number of projects in the education sector and one framework in the custodial sector. And I mean, one of those projects was on the ground and halfway through, as I described a minute ago. We don't like taking those projects because they are generally troublesome. And so -- but of course, our clients want us to help them out. So we do that.
So the project -- the one project we've taken for ISG was taken on a straight-up cost reimbursable basis, so actual cost plus a fee. So we'll finish the job, we'll get it done, we'll take down what doesn't pass, must finish the project and the client will pay us the actual cost plus our fee. So there's no risk in that, which is the important thing.
On all the other projects, which aren't on the ground yet, we'll corroborate the design, we'll corroborate the pricing and so on before we start work on the ground. And in frameworks, they'll be on the same terms as the existing framework -- as our existing frameworks. So the profitability is included in how you build up the -- in how clever your design is and how you build up the cost and include the risk factors that I mentioned earlier on.
And until we contract them, they're not in our order book yet. So things that goes on top.
Yes. So I reckon we'll get upwards probably more than GBP 400 million of worth of work out of the failure of ISG.
Government policies. Well, to be fair, they're making some good progress. They've acted in the roads market to prevent the sort of cycle of appeals for roads. And so there's only one appeal that's allowed now and that's it. And that will take probably a year off the average gestation period of a road. So that's very positive for us and the whole industry.
They are looking at how they shortened the planning process I saw yesterday [ before it even ] was, there's a view to reducing the input from local councils to planning and leaving for the planners in certain projects. So that, I think, will help. But also, they're showing signs of being a bit more bullish about shortening the whole planning process and getting rid of some of the hurdles that we face.
So for example, in high-rise buildings, the new safety -- the new building regulator is finding his feet, finding the sort of way he operates. The industry is trying to understand how it operates. We don't have any projects in that system at the moment, by the way, but there is a bit of a hiatus there in terms of getting those projects through the new regulator.
The government, again, has woken up to that and is now trying to fix that, as is the industry. So I think that logjam will see itself good in the not too far distant future.
And then there are things like water neutrality and nutrient neutrality, which we still need to deal with. So there are a few self-imposed hurdles here, which we still need to get through. But overall, the government is showing willing in driving change through, which is good to see actually.
Okay. So why are we so keen on frameworks? Well, frameworks give us really good long-term visibility. They give us long-term relationships with our clients. That visibility allows us to get our ducks in a row in terms of our people, our supply chain, materials, all those good things, balancing our resources to [ go ] as a long way into the future. So that's why we're so keen on frameworks, and we do upwards of 90% of our work in the frameworks, long-term frameworks.
And just as an example, the top 3 bars there, the top three green bars in environment is AMP7 and 8 in England, [ DB2 ] and SR21 are Scottish frameworks in water. So you see three bars there. But when you dig beneath the skin of that, you get to this slide.
So we have currently 55 frameworks in the water industry work for every single of the big water companies in the U.K. and the environment agency. And you can see the spread there on the right-hand side in terms of the design -- big design and build frameworks. And most impressively for me, our progress in establishing a footprint on the smaller capital maintenance and water technologies frameworks.
So a really good position in AMP8. And you can see down the bottom there, obviously, as Kris said earlier on, we're in the crossover at the moment between AMP7 and AMP8 or will be in the crossover shortly.
Remember that a contract let on the last day of AMP7 will take 18 months to 2 years to build and a contract let in the first day of AMP8 will take at least 6 months to get on to the ground.
So there is quite a long merge of AMP7 and AMP8. As Kris said, there's typically a bit of a dip in that merge, but so far, so good. And as we said, in AMP7, we tend to see a tail off at this point, and we've not seen that, and it's just been carrying on.
But you can see as well there that the split between those frameworks in AMP7 and AMP8 is pretty much double in AMP8. We've gone from 19 frameworks in AMP7, which will finish and SR 21 finishes next year, up to 36 frameworks going forward. So we've made a really good progress there.
And of course, AMP8 goes to 2030. I can tell you that we'll be doing the same thing in AMP9 and AMP10. So most of our frameworks, if you go back to the previous slide, in water are extendable for 5 years, generally 5 years. There are a few variations. But I reckon we've got a very solid foundation of work in water for the next decade and more, if I was a betting man. So really good progress there.
So all in all, everyone, we had a really good start to the strategy period. We've had a really good half year. And as we've said and as Kris said, we think that the second half will be broadly flat on the first half. So that's where we are. That 3% I mentioned at the start of the presentation is still our way point next year, next financial year, en route our 4% in 2022, and we're sure we can get there.
So thank you. We have any questions?
One more question. Any exposure if Thames Water fails?
Well, we've looked into this, obviously, a few things here. Firstly, Thames are being very good at talking to us and keeping us appraised of the situation. They're paying us on the nose every month. We've had no issues with them at all in terms of payment. .
And all of our work with Thames is a target cost, cost reimbursable basis, which means that at the start of the month, we forecast what we're going to spend in the month, and we tell Thames Water out in this example. And then at that point in time, they pay us. So actually, we only have a month out of pocket at any one time.
And -- but the most important thing here is that the government has an obligation on the special administrative regime to step in if a critical national infrastructure company like Thames fails. So there's been a lot of preparation, I'm sure, behind the scenes that if Thames does fail, the government steps in, and you carry on pretty much as usual. The contracts are just novated. In fact, the governments will just step in above Thames Water utilities, I guess, and carry on.
So I don't want to sign [ blase ], there might be a bit of a hiatus, but that's all. I'm not worried about it at all.
And by the way, I think -- well, I don't know, maybe I'm too much of an optimist. I think they'll get it through.
So any other questions? Anybody?
What we'll do is wait a moment. If not, we'll just ask you for a few closing comments, but we'll give it a minute.
Okay. Thank you. Okay. Can't see any.
Okay. Well, thank you, everyone, for listening. Appreciate your time. Just in closing, we're in really good shape. We've got a really good bunch of people. We've got a really good order book. We've got a really good balance sheet. No debt, no pension fund liabilities, strong cash. And the outlook looks really good.
I suppose the other theme, when Kris and I've been going around the road show the half-year results, has been concerned about the government's ability to spend and will they divert money into defense. And my very strong view is not from our sectors. So our sectors are custodial, where there's not enough prisoner places now and there's forecast not to be for some considerable time. So that remains a very strong sector.
Education. We're still not building enough schools in this country to stand still, so that the condition of the asset continues to deteriorate overall, despite all the schools that we are building. So a massive market there, pretty much in perpetuity, I think.
Defense, we're big in defense. And if it is more spending, we will be a beneficiary of it. So -- and in roads, everywhere you go in roads, you can see the state of the roads are not very good everywhere you go. So there's an enormous spend still to come in roads and [indiscernible] is on the way. Hopefully, we'll know a bit more about it in the not too far distant future next year, I think it's out. And that will be a big number too. I don't know where it will be, but it will be GBP 20 million, GBP 30 billion.
So I'm very confident that the sectors we're in are critical to maintaining the productivity of this country, maintaining the social and economic infrastructure of this country to be productive, and it won't be affected by government cuts. They're looking somewhere else.
So we're in really good shape, everyone, and we're very confident in our ability to achieve our strategic goals out to 2030 and indeed beyond. Thank you very much for listening. Bye-bye.
Bill, Kris, thank you for updating investors today. Can I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few minutes to complete, so it should be greatly valued by the company.
On behalf of the management team of Galliford Try Holdings plc, we'd like to thank you for attending today's presentation, and good morning to you all.
Thank you.
