Hargreaves Services Plc (HSP) Earnings Call Transcript

Good afternoon, and welcome to the Hargreaves Services Plc Final Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO designate, Simon Hicks. Good afternoon to you.

Good afternoon. Good afternoon all, and welcome to our results presentation for financial year '26. I'm joined here with Stephen Craigen, our Chief Financial Officer; and Gordon may or may not join us later on in the presentation, just to make you all aware. So what have we achieved? And first of all, a real big thanks to the teams. I know a number of our own teams joined this presentation. So as I said on the video we recorded yesterday, a little bit back to what's been a really fantastic year for Hargreaves, continuing to grow and advance our strategy and delivering value. The highlights for the year, we've returned GBP 32.6 million in total to shareholders. That included the GBP 20 million tender offer as promised, driven by the first and second sales of our renewables asset. First and second tranches sold. Services revenue as last year -- as interim is going well. Volumes are up and margins are being maintained at that 6%, which is great news and testament to all the hard work that goes out there in the field. The delivery of those things delivered a strong cash position despite returning GBP 32.6 million. We've ended the year with a strong cash position of GBP 21.6 million, and we've delivered a full year dividend, which is up 8% to GBP 0.40. And as is evidence of me sitting here, we've delivered the CEO succession. So just to recap on what is our strategic value proposition. We're in 3 divisions, as folks know, the first division, the Service division, which is our contracted services business. This is the business that operates out there in critical infrastructure, really focused on contract wins and areas where we can grow our core competencies. The message for services is continuing to grow, that business is growing the revenue and maintaining the margin. From the Land business, we've done that first realization of our renewable assets and we've continued to realize plot sales at Blindwells. The strategy for this business is to reduce the capital that we have got employed in there, and that is what we're doing. That's allowed us to return that value to shareholders. We're continuing to reduce that capital, and that will take us more towards a contracted services business for Land, which I'll touch on later in the presentation. We see a transfer of those skills and learning into doing that work for others who have the same land challenges. And then Germany, our third division, delivered well this year. We've got the dividend through, which is great news. The trading business has done well. That's where the profit contribution has come from. I'll touch more detail on this asset further in the presentation. But the strategy for Germany is to optimize that asset and maximize the returns by way of dividends, which we are doing. Stephen is now going to talk about the numbers in detail. Stephen?

Thanks, Simon. So first slide is really an overview of what the business has achieved over the last 5 years. All bars moving in the right direction on here. If I start top left table, we've got a dividend per share. We've spoken a lot in the past about having a progressive dividend policy, moving that return to shareholders up over the years, and that's exactly what we've done. You can see that in those bars culminating in the current year, increasing the full year dividend by 8%. In terms of return on capital employed, that again, moving in the right direction. It's benefited in the year by a couple of one-offs, most notably the sale of the renewable energy land assets and the settlement with Tungsten West, but it is nevertheless moving in the right direction, still subdued by the impact of the high capital employed in our Land operations and the capital employed within Germany, which we'll look at later on. And the bottom 2 charts show broadly the same picture, which is a growth in our services operation, both in terms of revenue as the group over time has become more and more exposed to large-scale infrastructure projects and start to bring more services on to those sites and also in terms of PBT, which has grown at a quicker rate than revenue as our margin has improved over those 5 years as well by bringing higher, but higher margin work such as earthmoving and engineering services into the picture. In terms of the year that we currently -- the year we just ended rather, this is the usual run through the P&L that's done a few times now. The first top line relates to revenue from our services business unit, which is up 35% year-on-year. What's driven that growth? Well, there's additional work we've done at our major infrastructure projects of HS2 and Sizewell, but it's worth pointing out that it's not all earthmoving activity at those sites. We're bringing additional services on to those locations. So particularly the provision of building materials in terms of aggregates. Third part, we are subcontracting civils work, so managing that process in terms of particular the key access roads on to site and managing logistics and materials handling on site as well. So bringing the full package of what Hargreaves can deliver on at these major infrastructure sites. In addition to that, we've also got a presence on Lower Thames Crossing, which we announced a few months back. We started open trial pits at some of the reservoir projects, and we're also seeing growth in water engineering services as well. So overall, significant growth in the revenue, which we're really pleased to see. That's dropped down into our profit from services, which is now up 27% to GBP 20.2 million. You'll notice that the margin year-on-year is ever so slightly suppressed. That's really because the provision of aggregates into these projects just doesn't come at that high margin that the engineering works does. But nevertheless, it's a good ancillary service to provide those projects. If we look at Hargreaves Land, that's grown by 443%, which is quite the growth and the GBP 12.5 million PBT delivered in the year really benefited from the first 2 tranches of the renewable energy land asset sales, which contributed around about GBP 9 million of additional profit in the year. Taking that out, we were fairly flat year-on-year with continued sales coming out of our Blindwells site. The German operation profit after tax for Germany was GBP 6.3 million, growth by 54%, really benefit from additional volumes in the trading aspect of that business, and I'll pick that up in detail a little bit later on. Corporate costs slightly up, part of that's inflation, part of it is additional investment in order to support the growth in the overall business, brings us to a profit before tax of GBP 34 million. That excluded the one-off gain with Tungsten West, where we settled the long-standing mining services contract for a one-off gain of GBP 7 million, not really fair to include that as underlying because we can't do that again. Amortization takes us down to the profit before tax for the year of just over GBP 40 million. Tax at the usual rate gives us GBP 31 million for the full year. If I just get down to the EBITDA number, which has grown by 8.6%. Obviously, whilst that's strong growth, it's not reflected in the profit before tax growth, which is significantly higher. So worth just pointing out, EBITDA doesn't include the sales of the renewable assets, neither does it include the one-off gains from Tungsten West. In terms of the balance sheet, just to give everyone a sense of what the -- where the capital is invested. It's not a huge change from what you've seen on the year before. I'll just work left to right. So on the left-hand side of the page, we've got our Services business unit, which delivered about GBP 20.2 million profit in the year. The big change here is that fixed asset investment is higher than it was this time last year. Correspondingly, the finance lease debt is also higher because we fund all of that yellow plant machinery. Reason for the investment in that plant is really to support that growth in revenue we saw on the previous page. Otherwise, working capital continues to be extremely well managed within services and overall capital employed or equity employed is less than GBP 10 million. Moving to the right, the land business with GBP 88 million employed in there. The top line includes the renewable energy land assets plus other investment properties up to GBP 12 million. The largest asset in that balance sheet there sits within inventory, and that is the investment we have in Blindwells, which is GBP 44 million in the -- on the balance sheet there. Whilst we sold 2 plots at Blindwells during the year, we've also reinvested some of those proceeds back into the site in order to open up the remainder of the site and also fulfill some of our statutory obligations on that project. Going to Germany on the left, GBP 75 million of cash tied up in Germany. The new line in here is the top one, that GBP 3.6 million of the fixed asset. That represents the group's current investment into the zinc recycling project, which we'll go through in a bit more detail later on and originally presented to the market back in November. Approximately half of that GBP 3.6 million relates to land that's been acquired upon which the plant will ultimately sit and the remainder relates to design, planning, permitting, licensing works that have been done so far. Spades won't go into the ground on that until later this year. In terms of the unallocated column, fairly straightforward. The only thing I would point out is we entered the year with GBP 21.6 million in the bank after having returned over GBP 32 million back to shareholders, and we end the year again without any bank borrowings outside of specific leasing debt. This slide is one we've had in for a few years now in terms of just trying to give some structure to how you might want to think about valuing this business or certainly how we consider valuing this business. So on the left-hand side, we've got services business. The numbers in here have changed quite a bit over the last few years, all but is in the right direction, which is really pleasing to see. But long-term contracts, over 75 in the order book, 75 contracts in the book, solid margins at over 6%. So some sort of multiple on your chosen metric would be the way to go on that one. In terms of land, when we saw -- when you've seen this slide previously, we've had a renewable uplift of GBP 20 million. It's now GBP 10 million because we've already sold some of that renewable uplift, realized that value and returned that to shareholders via the tender offer in May. The book value is at historic costs. We don't value it to fair value. And so we believe there's some hidden value within that over and above that GBP 80 million. So an asset valuation of that land value is probably -- that land portfolio is the most sensible way to look at that. And then the German joint venture. Key thing from this from our perspective, as Simon pointed out a few slides ago, is to optimize the cash return from this business. We've received in the year cash of GBP 6.6 million out of the German JV. We expect to receive a similar amount in the coming year. That's a regular occurrence now. And so some sort of multiple on that would be a sensible way to value that with no doubt floor, which is our book value because it's underpinned by solid assets. And then going through the cash flow left to right, we started the year with GBP 23.3 million in the bank. We've had a very strong operating year, as you've seen, of GBP 35 million. Add back our depreciation, which is noncash. We then taken off a one-off sales, so the gain on the fixed assets. So that includes the profit from the sale of the renewable energy land assets, but also some other assets that were sold. The other working capital expenditure would appear on here of GBP 10.9 million basically reflects the unwind of an extremely strong working capital position we had last year. Anyone who was on the call last year will have heard me saying we got paid quite early by a couple of clients and that the working capital was abnormally low due to timing. This GBP 10.9 million outflow is just that unwinding. And you'll still see if you look back at services, the working capital tied up in there is still extremely good. Interest and tax is low. The net CapEx is an income of GBP 14.2 million, again, reflecting the fact that we received GBP 15.5 million for selling the renewable energy land assets with a small amount of additional CapEx going the other way. We received a GBP 6.6 million dividend from Germany during the year, and that completes the investing element. Lease payments we made against our lease obligations of GBP 21 million broadly matches off with the depreciation, which is what you would expect to see if we're maintaining a relatively stable fleet. The last 2 columns reflect dividends paid of GBP 12.8 million and GBP 20 million. As Simon mentioned earlier, we returned GBP 32.6 million back to shareholders. That's those 2 columns. The eagle-eyed amongst you will notice that, that adds to GBP 32.8 million. And the reason for the slight GBP 200,000 difference is because we paid GBP 200,000 dividend to a noncontrolling interest. So GBP 32.6 million went to shareholders of Hargreaves Services Plc, GBP 200,000 went to a minority interest holder, and then we ended the year with GBP 21.6 million. Simon, can you take us through Services?

Yes. Okay. So I will take shareholders and view us through service by service. We look at the Services business first. That's our contracted provision of skilled personal equipment in major critical infrastructure and operational of major critical infrastructure assets. So the sort of services we do, land remediation, major earth moving, management of people's waste, materials processing, industrial services, minerals trading and logistics and bulk haulage. The way we're starting to look at this business is contracted services business, and this assists us with how we develop our land provision as we go through to be a capital-light businesses. On the left-hand side towards the top left of that oddly shaped picture, which is shaped like a rugby ball because in my mind, that's the only game you should play with a ball. So the rugby ball, why are we looking at it like that is because each of our individual businesses are really good strong players, and we want them to start thinking about playing more as a team and giving value across the entire service provision. So if you look at the top left-hand side, it's where we are sourcing opportunities. So the land team are looking at remediating land for other people. We've done a lot of land remediation and value creation on our own land and developed a really strong skill set. There is the opportunity for the land team to do that for others where others are providing the funding or own the land, and we're seeing some of that moving forward. We'll talk about that when we get into the land business. We often move material [indiscernible] shifting for other people. We move that material with our earthmoving business. We're developing new large infrastructure projects with earthmoving, which is our Blackwell business. And we were moving waste as these sites are upgraded using our waste management business and all of that goes on our vehicles. So on the left-hand side, we're seeing that creation of value in brown and greenfield land or major infrastructure projects. On the right-hand side, where you see us turning off is operating the assets for others that own the assets. So we'd be operating a waste from energy plant or we'll be taking the material to them on our vehicles or moving waste sludges around for water companies. So generating value from creation and land and operating those assets on the other side. So that gives us 2 dimensions to the business. The operating business tends to be long-term maintenance contracts. And then as we move back again, it's back into remediation where land are promoting land and investing in new assets that come into that land. Other people doing the investment, we're providing the services. And throughout that cycle, what we're seeing is a demand for recycled or recovered or secondary aggregate. And that is where we're growing our minerals trading business growing well over the course of this year and see a good outlet for that business. It not only can we provide the service of moving the earth or moving the waste or transporting aggregates, we're actually sourcing and providing those aggregates into these large-scale projects. So we see that coming together of those services businesses as well as operating independently. And because we have a strong base of customers, 75 this year, which is 5 up on last year with long-term relationships in that operational side, that industrial side where we do the engineering and maintenance services, it allows us to be selective. So we can select contracts that fit with the services we want to provide, fit with our skill set and give us the ability to not enter into EPC lump sum type arrangements. So we operate under contracts that we protected on cost, deliver strong margins for the sector, which is over 6%, gives us good strong free cash flows because we get reasonable payment terms and that all drives that really strong return on capital employed. So inflation-resistant contracts with very limited credit exposure gives us the opportunity to continue to grow this business segment into a market which has a very positive outlook. And as I said, we're in critical infrastructure and that investment cycle across connecting people, clean energy and the environment, the outlook for that remains strong. We haven't changed our views on the outlook. In fact, if anything, they've hardened because we're seeing more investment, more projects coming out of engineering and into construction. As Stephen said, we mobilized at Lower Thames Crossing, north of the Thames. We're seeing progress at West Burton, where we're clearing ash from that site. We've strengthened our position in the energy from waste sector over the course of the year. And we're seeing things now like pumped hydro in Scotland in order to store the excess energy that the country's wind portfolio delivers for Scotland. So we're seeing pumped hydro schemes potentially. We've seen the grid being upgraded with Eastern Greenlink coming forward. We've got a presence with Anglia, as we said, digging those trial pits. So we're seeing the reservoir work, and we're continuing to work to advance our positions in waste management, land remediation and that provision of sustainable resources. The message to take here is a strong position in infrastructure with a strong outlet. So progress we made in FY '26. We made progress in all of our markets, but notably our position on Lower Thames. We're doing a very interesting project for power minerals at the Drax Power Station, where we are recovering the ash out of the ash fields. This is a waste left behind by the generation over many years at that asset. And we're building and engineering the plant, which converts that material into a fuel for onward sale. So we're doing the capital work there, and we're doing the movement of the materials. We've extended our position with Fortis, which is removing the waste from energy from waste plants. We're hauling that waste -- RBA waste to their storage facilities. And as I said, Anglian Water, we are doing the observational trial pits already. Pipeline that we shared in the previous session at half year and previously remains in the capital markets that we shared. This remains buoyant as we said, a lot of volume, some slight movement on reservoirs moving out a bit. We expect carbon capture moving out. No surprise there with the change in regime in the U.S., carbon capture has slowed down a bit. There is still progress we see being made, particularly in the Northwest. And HS2 continues to see some delays towards completion, but we are starting now to hand over some of those areas at HS2, which will free us up to move down and mobilize as we have done at Lower Thames Crossing and take advantage of this pipeline of work coming towards us. Order coverage. In a good shape, entering the year with 70% contracted into FY '27, 51%, we can see already for FY '28, which typically for us around that 65%, 70% when we enter a year is where we'd like to be. The duration of contracts, 3.6 years, that sort of masks the fact that these relationships we have with those 75 customers last 10, 15, 20 years. So long relationships on contract durations that are sort of 3 to 4 years, and 90% of them protected from inflation, both inflation and fuel inflation. So in a strong position there. Customer concentration, yes, Sizewell, EKFB, our largest customers. What's pleasing to see is that 80-20 rule that when you get to the top 20, that's giving us 78% of our revenue. So not too much concentration with those customers and a reasonably sized tail, which gives us confidence in customer base. Moving on to land, just a refresher of what we do, the multiphase master developer on our own assets, Blindwells in particular, where we've got the first Blindwells space with 1,600 plots consented. We've got 500 families on site now. I was up there a few weeks ago. You can feel that is now starting to turn into a community. You can see the school there, the playing fields. We're talking about development of the town center. The access roads were absolutely there, and there are people living on that site and making lives in that community. So that is moving forward. As is Unity, we've got the TJ Morris investment on Unity building a very large distribution center there. McDonald's is open, Starbucks is open. So that site is progressing. Yes, it's slow. It's commercial development, slower than we anticipated, it's still moving forward. We then moved into where we're doing bespoke commercial development, which is on a smaller scale. We do that for others. We've got a scheme moving in Glasgow, where we're taking 2 tower blocks and turning them into student accommodation. We're doing that through other people's equity and debt. We're providing those technical contracted services to realize value, and we take a percentage when that is progressing well. Our strategic land is something we're pleased about. It's how we're taking this business down into a capital-light region area and that is progressing. We've got a slide later to talk about that pipeline, but that's where we're promoting, planning and consenting for other landowners, particularly these are focused on small areas where you sort of get them under the radar so that the planning isn't a problem, so we can move those through in an efficient way. And of course, that renewables and clean energy skills that we have is continuing to advance. Stephen, do you want to pick up the key?

Yes, of course. So we might have mentioned this once or twice already, but a key event that occurred during the year, particularly within Land was the sale of the first 2 tranches of the renewable energy land assets. We've mentioned it a few times. I think it's worth mentioning, real significant milestone in the evolution of that idea and really nice to see it turn into actual cash back into the group and then return back to shareholders, which is what we said we would do right from the outset. So it's been really pleasing to get that under our belts. In addition to that, Blindwells continues the pace. We sold 2 plots in the year, combined proceeds of over GBP 20 million. So as Simon has already mentioned, turning into a real thriving community of the key movements in the current year. In terms of the pipeline, so as we've mentioned previously within Land, over GBP 80 million worth of our capital tied up in land. The plan is to release that capital over the next 4 to 5 years from large schemes like Blindwells and then return some of that and reinvest some of it into a more modest capital invested into things like land promotion or more deliberate development sites. So the plan here, you can see on the screen, the pipeline, the strategic land aspect, Simon mentioned a couple of slides ago is called residential promotion on here. You can see we've got 25 sites under auction in that area, nearly 5,000 plots. The plot pipeline is up 16%. So we're seeing this growing. And it will take a while for that business unit to get into a consistent profit delivery because it's from inception to realization probably 5 to 8 years, but the level of capital employed per scheme is substantially lower than we've seen in the development schemes, more like GBP 200,000 to GBP 400,000 per scheme depending on the complexity of planning. We expect to see the first one of our strategic land schemes complete in the next 12 months. It's already contracted. So it should be a matter of time, which will be the first one we've done and therefore, a bit of a milestone again in that land business. So yes, pleasing to see that growing. Hope to update in due course about that. And in terms of the renewables portfolio, I won't repeat it again, but they've been sold, two of them at the bottom there. And they talk about what's left, okay? What's next is probably more important. So we still have 5 schemes of wind farms and access agreements over our land for which we are receiving rental income. And we are on the [indiscernible] books at GBP 3.3 million, which is the historic cost of those sites, and we've had them recently independently valued by Jones Lang LaSalle at GBP 9.1 million. That's a slight increase on the GBP 8.7 million that we had in the prior year. No real change to the scheme. That's just really a function of the market sentiment at the moment. And when will they be sold? Well, not in the near term is the short answer. So what we've learned from the first 2 sales, whilst we're very pleased with the values that we got on them and they're in line with the independent valuation that we received, the level of interest was somewhat reduced because the schemes are fairly early stage. So whilst they were operating, they haven't been operating for a long time. And one of the key considerations on these schemes is how windy is the wind farm. So how much electricity and therefore, revenue will it generate. So the plan going forward would be to leave the schemes for a little bit longer, let them mature, see how the wind flow is going and then go to the market. And at that point, we think we should be able to optimize value by bringing in a wider variety of potential purchases. In terms of beyond those 5 schemes, there are still 7 schemes that we can see on the horizon. None of them have planning and only 3 of them are currently contracted with us, which is why we're keen to not put out an independent value on them because the last thing I want to be to say is here's some value and then for whatever reason, it falls away because it's not contracted yet or there's a problem with planning. Once they move through those stage gates to receive planning, then we'll get the values and pop them into the pipeline there. But there is a bit of ready reckoning you can do in terms of valuation regarding the megawattage and what the independent value is on those that we currently have. So you can make of that what you will in terms of where they may end up in the future. And Germany?

Reminder on Germany. What do we do? We have a joint venture in Germany where we have -- we're entitled to 86% of the economic value, but we own 49.9%. Germany is broken into 3 divisions. HRMS Trading, which is a trading business, which trades our commodities on a back-to-back basis. So we don't have any risk in that business. DK Recycling is a large blast furnace, which we'll talk a bit more detail about in subsequent slides. And the zinc recycling project, which is owned by us, 86% owned by us is what we're really excited about. We're developing here a pretreatment plant in effect that works in support of the DK Recycling asset. And Gordon's nipped in and joined me. When we get to that slide, he will give a lot more detail into zinc recycling. But before that, Stephen is going to talk about more detail on the results of Germany because in our numbers, it's just one line.

Thanks. Yes, and that one line is probably not enough to make much of a judgment on. So just broken out the 2 elements of the joint venture here. There's no zinc on here yet because it hasn't really started. We've done some CapEx as you saw earlier, but that's about it. So the revenue HRMS relates to the trading business, the commodity trading business. That's had a good year compared to the last couple of years, improvement in volumes, 12% up in volume. The commodity prices that are trading are broadly stable, which has meant that we've been able to maintain margins of a little under 6% there. So the 54% improvement in the joint venture result is all really coming from that increase of activity in the German trading business. If we look at DK, the increase -- sorry, the steel waste recycling facility, it has improved from GBP 1.4 million loss to GBP 1.1 million loss. And the main driver behind that is the control and slight improvement on input fuel costs. But what we haven't seen, which we might have hoped to see with the [indiscernible] wind was an improvement in pig iron prices beyond what we've seen. They are staying stubbornly low at the moment. Gordon will pick up some reasons as to why that might improve as we go forward, but we haven't seen that improvement that we would have hoped. And it only takes a slight improvement in the pig iron price to push the profits up. So we're still hopeful to see that come through.

So to pick up -- thank you. [indiscernible] So just as far as you know there's 3 parts of the business, everyone, the HRMS has a trading history. It's always popped along and said between this lower case and upper case, it continues to do that. The business has never lost money. It's always about back-to-back trade. It's all about volume. Great bunch of trains. They own the other 14% of the business, so they're specifically aligned with shareholders. So nice steady recurring income stream, which generates dividend really and have done for a number of years that they passed back to drive into our dividend. So nothing to be concerned about here. It will move within that range. Next is DK Recycling. Now remember, there is existing blast furnaces across Europe. We process about 0.5 million tonnes of waste dust. But they didn't come to decay, they'd go to landfill. So this is very environmentally friendly. The output of that is you basically get energy zinc from pig iron. So you recycle about 98% of the dust that come to you. Pig iron trades at about EUR 500 a tonne, and we produced 250,000 tonnes. So an incremental move of EUR 10, that's EUR 2.5 million to the bottom line. So you can see we're nearly there, not quite. Why do we believe prices will move up? Well, really 3 things. First of all, there's a thing called CBAN, which has put a tax on the import of pig iron. Secondly is that as big electric arc furnaces get turned on, you will see the demand for scrap will increase and then that scrap prices should move up. And third, we've mentioned it before, there's been an embargo on Russian pig iron into Europe. So we see those prices moving and when they do, we see DK moving back into profit. At the moment, not particularly concerning. But just flipping on to the other page. So what we said to everyone, this is the really what I regard as exciting bit and there's a bit of an update here for shareholders. We said this is going to cost about EUR 20 million to build. What we also said to you, we were hoping to get German government's support. Really pleased to report that the German government has actually given us effectively a EUR 2 million development grant, but they've also given us EUR 12.5 million as a nonrecourse loan. And what that means to me as a shareholder alongside yourselves is that if this plant doesn't work and something goes wrong, the risk is EUR 8 million. So personally, I look at -- I've got about EUR 800,000 that I'm betting on this will work. So that's the downside, if this doesn't work. We do think it will work because it's not new technology, it's mixing things chemically. You should be reassured that the German government have stress tested and they've put money in. So they are confident it's going to work. And we have a number of customers keen to work with us. Now the interesting thing about this is it targets the new big electric arc furnaces that are being built. So they produce a zinc, which is typically 10%, too high in zinc for DK, but too low for the existing technology called a ballast kiln, which deals with traditional small electric arcs. And that means that we are the only technology available for these wind plants that are being built. And so those new plants, each costing $2 billion to build green technology will either put material into landfill, about 30,000 tonnes per plant or they'll send it to us to process. The great thing about that is we already have one steel plants approached us and said we'll be signing an LOI, contracts we're drawing up with the big 3. And what we're hoping is so we have the money, the plant is going to start and build at the end of the summer. It will be operational targeting for January '28 when the first big year comes on stream. And then when the concept is proved, we'll look to add a bigger one for the other 2 plants that come online. Now just in context, the big zinc recycler for existing electric arc furnace is a company called Frazier has a market cap of $1 billion. This technology is very disruptive. It is not like gasification or something that hasn't been tried and tested. This is about mixing all the chemicals. It's a leaching process, mixing it in a particular way, of course, in different temperatures and pressures. But we're quite excited about the opportunity. So at the moment, I always like to look at it what's the downside? Well, the downside is might be an exceptional write off of GBP 8 million. The upside is very, very significant. And the good thing is this isn't [indiscernible]. Simon is taking over running the business. I'm going to go to Germany and lead this project. I think it's really exciting. And the plan will either be working or not in 2028. And if it does, it's going to introduce significant value for shareholders. And that's where I would provide the best focus, I think. So that's -- do you have any other? I think these guys are going to do the outlook. And then at the very end, I'm just going to say goodbye.

Thank you, Gordon. So outlook in summary, the services business grow. We're growing that business. We've got 70% revenue secured and the continued focus on major infrastructure projects. Where you see us turn up is the type of projects that society needs to be delivered. So we're turning up in that space, which delivers a sustainable underlying growth in our profit. Land, it's about reducing our capital employed in that business and then taking that skill and knowledge that we've learned and transforming that into a contracted services provision for others. So using the knowledge we've already got in our land team. In the short term, it's about that first strategic land sale, further development of renewables and continued progress in the Blindwells Phase 1. So reduced our investment in that portfolio. Germany, as Gordon talked about is about optimization, return the dividend, investing in a plant to increase its value in that asset and thinking about what we do with the German asset once we've proven that technology. So the outlook for us is strong under those 3 divisions. The next page is really summarizing what we believe is our investment case, the drivers for that on the right-hand side, as we said, strong 10-year infrastructure strategy in our dominant market, which is the U.K., and super-cycle of investment that we're seeing, housing planning reform, so land needs to be unlocked for new communities to be developed upon and all underpinned by strong U.K. engineering skills. The water investment cycle, we're seeing that coming towards us, particularly on inside the AMP 8, 9, 10, 11 frameworks, but also within that capital investment into strategic reservoirs. Waste is a constant. Our industrial logistics and waste businesses are all focused now in the waste sector. The waste sector is something that won't go away. That removal of municipal waste and biosolids from water treatment companies, it's a long-term play in there. The nuclear road map is now we've seen that broadening just from Hinkley to Sizewell, into SMRs, into nuclear fusion. We're seeing more and more investment going into that space. And indeed, the drive for data centers in the U.K., which requires clean energy. So all those drivers, and we are well positioned with our people, with our services, with the skills that we have and the clear growth strategy into those sectors. So our investment case is clearly positioned to drive into those markets, and that's underpinned by what we believe is a very strong and robust balance sheet. And with that in mind, I'll hand back to the person who I see is responsible for a lot of getting us to that position over the last 25 years, Gordon Banham.

Well, thank you very much. I just want to use this opportunity to say to everyone who's dialed in. Look, thank you for your support that I've had over the years. It's been great fun working with the team, but also having the support of the shareholders. It's good to go out on the second best year we've ever had in the 20 years I've run this listed company. I think we live in a strong place, GBP 21 million of cash, a very clean balance sheet. One of the important things I would say to you is that I've spent a long time finding Simon. I think he will do a better job than I would running services. You know where I came from coal company, intra services business. We created the platform, but now he's going to take it and fly it with the support of Stephen. Stephen has been with me for a number of years. And I think the most reassuring thing I can say to you all is I'm not selling any of my shareholding. I'm going to back this team because I believe in them. And I think that's hopefully reassuring for you. But I would like to take this opportunity to thank everyone who's backed me over the years. It's been a pleasure, and I will try and add significant value for all of us in Germany before I finally hand up my boots. So thank you very much, and over to questions.

Thank you, guys. So I've had a few questions through, one pre-submitted. Unfortunately, I don't know who submitted it, but I think that's probably one for you, Simon. Many recent reports of near grid outages is one factor being that poor grid connectivity, particularly in rural areas. Does this affect Hargreaves either directly or indirectly in the demand for land aimed at solar or wind installations? Are we impacted by...

Are we impacted by -- I'd see -- I guess, I don't think we're impacted by the outages per se, but I think it's an opportunity. I'm picking up a term when I went around, large-scale investors, powered land. It's land that has power connections and grid connections and a number of the land assets we have power. Other people put renewables on them, solar on them, there are assets with grid connections nearby or in proximity, which adds additional value. If you go and Google public domain information about what does that mean, Powered land. So if you think back when we had coal mines, we put power stations on top of them and the industry was built around that. The same will apply to powered land. So data centers, real demand for that. You just have to be careful that you don't go into those that are not going to move things forward. So yes, it's an opportunity for the group is my answer to that question.

Probably another one for you, Simon. Mark S is asking, do you have any thoughts on how the new labor leadership policies might impact the company?

I guess early days for me, but what we're hearing is from a -- if you think about getting projects away locally and local mayors have control of their budget, makes sense for what we do, makes sense for regional developments. But when it comes to those major critical large-scale infrastructure projects, my experience of this in the last 30, 35 years is we've got the most robust U.K. infrastructure strategy we've seen for many years. It's got both party support. I cannot see how any change in leadership in a political party would say, I'm not going to build a reservoir that gives London water. I'm not going to invest in things that connects people to the regions. So it's a long-term strategy. We're seeing boots in the ground. I wouldn't see that it would impact us in the short term for sure.

Germany, one more from Alan. You previously referenced 3 reasons why the price of pig iron might be expected to increase. The RNS today already mentioned 2 of them with sanctions on Russia being excluded. Was it deliberate and then are Russian sanctions no longer expected to be a factor?

No, no. I did say that in the presentation that it is probably something we should have put into that. I mentioned that, yes, it's an impact.