Hargreaves Services Plc (HSP) Earnings Call Transcript

Good afternoon, ladies and gentlemen, and welcome to the Hargreaves Services Plc Investor Presentation. Throughout this recorded presentation, [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and will publish those responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, I would like to submit following poll. And if you could give that your kind attention. I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from Hargreaves Services Plc. Gordon, good afternoon, sir.

Good afternoon. Thank you very much. Thank you very much to everyone who has paid some time to attend and listen to the Hargreaves story. Can I just encourage you that if there's any misunderstandings, anything that you do not understand from the presentation, and you have the answers to be happy with in the questions section. Please contact us. We are very keen to engage with retail investors to make sure they have a great clear picture of what the business is doing. So we no less crack into the presentation for the interim results. So, first thing is for those of you who have known us well know the story we just for anyone that's new, that's reading in, story has been on a journey, and we're very much in the realized stage of that. We have main businesses. So this is very much a sum of the parts play. So it should be quite easy to get your head for the 3 businesses. There's a services business. That business has a number of contracts spread over a wide portfolio of industries. We'll talk about it in some detail. The key theme of these is their inflation resistant contracts. And we're seeing through the cycle when inflation was peaking over 10%, but we still deliver the profits that we've expected. So that gives you the comfort of that business, and I'll go through a bit more detail. Land, David Anderson is with me, we'll talk about that in some detail. Many points just to highlight is, remember, we do not market-to-market account on that portfolio. It's in the historic cost. So a lot of the flagship projects you're seeing there were based on old mining sites that were held at a very low cost. Finally, the joint venture in Germany. Again, I'll give some flavor to that and what's going on there to get visibility helps. So just quickly take you over the page. This is a result of -- Services have a great time, doing very well. I'll give you a bit more flavor about how we see the outlook of that later in the presentation. In Hargreaves Land. By the nature of what David does, it's a very sort of transactional signage in the 6 months, not a lot happened. 6 months we're just moving into there's going to be a lot that happens, which results in David and his team having the best year ever. Again, David will give you the explanation of what's going on and what's leading to that and why our confidence is so why it's going to be a great year. As far as HRMS is concerned, again, there's 2 parts to that. There's the DK recycling, which is ring-fenced from the trading business. So that had a challenging 6 months. Again, we're not concerned because of the steps that have been taken to compensate in that we see cable we're going to profit in H2 and trading and we're expecting it to repeat very similar to what it did in H1. When you look at the business, you have seen that asset a share big thing as you can see, nearly $19 million of cash in the bank, but the big thing a theme is this 8p. Being great clear, we're very confident that this group will be able to number 36p around dividend. And that will organically grow when we continue to grow the services business. We'll explain where that step-up has taken place. But we've done it now and it's state is not beyond 1/3 2, but it's just 18 now and 18 later give some detail. So with that further ado, I shall hand over to Stephen Craigen, who's group at detail talk you through the financial review.

So just the usual rundown of the P&L to start with. Headline revenue has come down from GBP 116 million to GBP 110 million. However, that's mainly due to the timing of sales in our Land. And there's been several sales that are actually good at both period end. We expect to do so and that really affected that number. Underlying services revenue is up 2%, which is encouraging and in line with our expectations. But the big piece of news is the significant improvement in the margin on PBT in services. Moving from 6% margin, GBP 6.5 million, up to GBP 7.8 million or a 7% margin. So it's driving our margin improvement. It's mainly 2 for ones on our earthmoving business. We are significantly further into our HS2 activities and as such, able to remove the risk from the contract to be able to recognize with a slightly better margin, and also our engineering services that we're providing is a higher skilled work and able to coat a highest margin, and that's what strategic with that. An excellent job is on asset disposals. So for those of you who were joining into a year ago, you notice we had a one-off set of some assets in FY '23. Those assets obviously have not been sold again. So it's for a script that for to compare numbers like trying on has had a loss in the first half of the year. It had profit last year, purely due to timing. And as Gordon mentioned, Hargreaves is poised to have its best share of record within the group and David will outline company levels on that enrollment. And on HRMS, which is our German joint venture, again, we've made a loss in the first half of the year due to the difficult conditions out there. But in a couple of slides time, I'll break that down to you to explain what's going on there and towerlike why we think that was a coin second half. Other numbers are broadly straightforward, I think, so we get down to the dividend per share, which is a significant sixfold increase from 318 day. The reason for that is not that rather in almost jump is twofold. First of all, we are expecting by the pension scheme in the not-too-distant future if that expects to be very imminent. That will remove the need to spend GBP 92 million contribution payments equating to roughly GBP 5p per share per on. The other increase element is in relation to the cash returns that we're seeing now from HRMS. They would except GBP 8 million factors at the end of the half year. And we expect that as of that continue ongoing we think that's sustainable as well in the future slides. So just to run through the balance sheet. I'll highlight where the tax is currently invested, but I will also give an overview of when is in terms of expectation of value around the 3 business streams now. So in terms of services, the capital employed is only GBP 9 million, very consistent with what it was at the year end. The reason we are able to keep this so low is all of our markets assets are secured on finance pieces. So using the best money rather than investors money or shareholders money and still impressive thing, I believe, is our very tractor capital controls that we have. We've got negative working capital on the left services so I believes -- so now, we are being effectively being paid before we have to pay a lot of our clients on that front. That capital employed is able to generate at least GBP 20 million of EBITDA for an. So in terms of the valuation of that business, I'm sure you've got models that you would use to try value shares. If you might just get a standard 5x multiple sanitary billion and then for toe of roughly GBP 3 a share in terms of the simplistic valuation of that business about. In terms of land, there's obviously a significant amount of tonne invested into around GBP 80 million in total. The biggest single part of that is an as which is our housing development outside of stock as November of GBP 40 million, and this is a bit of an unusual one. We've invested the money into flying tools in order to demonstrate our ability as a master developer. And now that's happened, future teams will be much more on capital as we're able to negotiate option agreements, profit share arrangements, which still require quite some high amounts of capital. Plans to align in the medium term. And therefore, we expect the amount of cash held in demand to drop from, I would say, it's out around about 20% in due course. Not about the wind is to do with blinds, but also we have cash aid coming from the renewals, which we announced in the summer. Currently, on the balance sheet, the renewables assets in booked cost GBP 7 million. And we have an estimated value sales money in the third part valuation of between GBP 27 million and GBP 28 million on our asset. So that's an overage GBP 20 million of the cost. The go cost of those assets. So the GBP 80 million is on cost. We have not make that value to market value. If you are a scale value from the renewables, you're another GBP 100 million on land. Again, it's very significant GBP 3 a share in the land business. And HRMS, the beginners here is our starting to get cash back. The repatriation of GBP 8 million in the footer employed down significantly as you can see there, from GBP 76 million, down to GBP 67 million. And there is no intention from the Board to revise that cash flow. Previously, we have invested on GBP 50 million at short-term loan to support additional working capital requirements in that business when the commodity cycle is off. There's no intention from the Board to do that again. This is about moving cash from that German business and being able to pull it back into our balance sheet in order to match to shareholders in due course. In terms of valuation on HRMS and Gordon will talk about his thoughts on DK, but even if we just consider that to be valued at book value and we get our cash back but talking another GBP 3 a share in terms of valuation. So to simplistically, we've got GBP 3 services, GBP 3 HRMS and investors, and GBP 8 valuation high level in terms of where we see the business at the moment, cash and leasing that broadly now. So certainly by the year-end. And that for, we saw say are net debt neutral. And current share price is GBP 4, growing to GBP 8 in due course. The big question is, of course, timing of delivery on these cash receipts and that is increasing the dividend to create a 9% yield based on a GBP 4 dividend for can share price rather. And so GBP 4 to GBP 3, 9% yields currently, we think that's quite a case. And that's why at our all of you today. The other thing I'll pick up on here is just around the pension scheme. Obviously, it was a key strategic target at an end to remove the pension scheme on client then. It's on the balance sheet as an asset of GBP 6 million. However, it will cost no less -- sorry, no more than GBP 9 new can by the team out hoping, but it will be significantly less. The big disconnect that is just the quote of IFRS accounting and how we have to account for it. The real -- in reality, it's liability of certainly no more than GBP 5 million. And we optimize ocean in Quarter 1 this calendar year. the key just by now, we remain free of that debt, cash on the balance sheet, no eventual for any of our assets. In terms of the cash flow in the first half of the year, the first 3 columns are here are effectively an explanation of the EBITDA go in the business, so in a PBT of GBP 2.7 million, of which GBP 1.7 million was a loss of joint ventures, which is noncash, much like when new profit will also as stripped out. And then we've got GBP 7 million worth of depreciation, which relates to the assets we have on the HS2 contract but the services contracts. Our GBP 7.2 million in depreciation is largely offset by the leasing payments of GBP 8 million. Bear in mind, our CapEx, to be honest, throughout the group. Now we've also broken out the nominating capital movements. The investment in blinded site during there of GBP 5 million, which will bind in the second half as we get sales completed. And then the other working capital movement did not largely reflects the receipt we received from HRMS in the first half. The final piece of the jigsaw is reading the dividends paid of just under GBP 6 million, which relates final dividend that was announced as of May 23, financial year end. So we closed the half on GBP 18.7 million. So just to give a bit more color on HRMS' results of the first half of the year and to other results been major because you don't get too much from the annual accounts. So the business is in 3 halves, but 2 parts that are material on the trading business and the eco recycling business. The trading business has had a significant reduction in revenue, mostly driven by a reduction in volume as a lot of the customers they work with or short-time working and reduce shippable. That's resulted in a significant reduction in volumes, but also we've seen a reduction in commodity prices as well, which is being the top of the revenue. But as squeezed margins and therefore, we've seen a reduction in profitability from a trading business GBP 5 million down to just over GBP 6 million. Now one of the things I really want to point out here because the question that will no doubt in your mind is about the sustainability of the additional GBP 7 million that we expect to get in Germany every year, I will be so certain about that. Well, the trading business and DK are refenced for each other. And in the first half of the year, the introns trading business is a GBP 6 million PBT. This is a low point in the cycle. And even if all they're able to achieve is the same again in the second half, which will obviously go in that to that. We're at GBP 12 million PBT. If we take tax off to that, we're in GBP 8.5 million. And then we are in fact to 86% of their profits, which is more than GBP 7 million per annum. So we're very confident that GBP 7 million is sustainable out to ongoing profits without any further unwind of the balance sheet. If we look at the DK, DK's revenue is down about 7% to GBP 66 million. You might expect that to come down further given the noise about pig iron prices that go dramatically but the reason it's not down further is because of the volumes. So patriated a lot more volume than the current year as did unmount the balance sheet, and you can see that in the inventory side where we met reduction in stock. However, because of the significant reduction in Pekin, which has been impacted by the fact that there is no sale, there was no action against the importing of Roche big in. However, one of the major impacts and one of the major inputs into bigger production is covers -- that is an embargo product from Russia. We've seen a reduction in pig revenues and an increase in our cost base, which has actually led to a loss in the first half of the year. Gordon will talk about the reasons why we think about the turn out in the second half, and we're confident that it will be profitable in H2. The only other thing I'll give out on this slide really is in the bottom left around the exposure. As we continue to see this increased amount of cash from back from HRMS we expect the exposure comes down, which is a realization of the assets out there. Gordon, turn back to you turn to our services number.

Thank you, Stephen. So I think Stephen has laid out actually a picture totally, everyone can get around some of the parts. So let's just dig into the 3 parts. So I come services stay for and cover property and then I'll come back on generally to just not underpin those numbers that Stephen will lay out. Some really services. For those of you who know as explained, but those don't -- we work in the sectors of energy, environmental, infrastructure industry. So we're not exposed to retail at 1 point. These are things that always need to be done. The 60 contracts as spread over wallets section. The biggest concentrations or contract on HS2, which I'll talk about in a second. But by the half year, we already have 9% of the revenue already secured. Took operating margins of 5%. To the left, we've got blue-chip customers, which means we're comfortable with credit exposure, our biggest customer is effectively the government -- we've been through the inflation cycle, ate the profit. So you can see they have stress tested our contracts, they are inflation resistant. So that gives you the main business. You'll see we're doing very well. The question on the next page that comes up is we'll hang on board, not this will for that, but HS2 is going to come to an end. I can understand you've got 59 other contracts, but our biggest contributor. So what happens there. Really simple. They just do that as 2 more years left to run. We never factored in the second stage of HS2. So that was an issue for us. The 3 contracts that we're really focused on is lower term sizable and that's the waste. Now there are 3, what we call irons in the fire. And that slows down after the next 2 years. which one of these will replace it. Well, if we take them in order of where I think the most chance of them will replace. First of all, the size. We're already working at size well. We have a great relationship with Eni moving contractor there. I think we're doing a good job. I think there's a good chance for us turning that into a big long-term contract. That's one. The -- we have to do a good job there. Secondly, I think in terms of opportunity, it's to the west. Now comes to the West full truck as they listen you'll see if you follow the publicity that basically, they're waiting for a report or a permit on noise from their processing product. If they get the government. The team there are very confident of raising the GBP 70 million. They've really been back by nearly GBP 5 million by Matson, and they are very confident of raising the extra GBP 70 million to go into production. This goes into production, we have the benefit of a 10-year contract overbook cost plus 7.5%. Revenue will be between GBP 20 million and GBP 25 million. So you can expect to get GBP 1.5 million, GBP 2 million profit a year for those 10 years. The important point to recognize, though, is when we negotiate the contract, it is not only overbook cost us, but it's also without credit risk. So before we turn the water under the terms of the contract, we need to be paid. So if some of them are wrong in 2 or 3 years time, we would not make up that there. Some of that's mental feature. Lower terms is probably the highest risk of not coming through. I simply put that down if we get a change of government. This profile may come into question for being in the South, who knows. We hope not, we are well positioned with Baheti it comes ahead -- so what I'd like to say is that we've got 3 lines in the file. If I get one of them, you're going to be fairly consistent. If I get a 2, you're going to get a hiccup. And if I get 3, I get a cherry on top of the ore. Hopefully that gives you some comfort that the sustainability of the revenue stream and services there, we don't need acquisitions. It's going to be organic growth and just looking after the customer base that we have of this 60 contracts. Aside of that, we were very successful with our engineering capability. These are 2 projects we mentioned. You'll always have a 2 to 3, 1, 2, 3 contracts at least like running through the business as well. So on that, I'll hand over to David, who will just talk you through the land.

Thanks, Gordon. Second, activities and market. We effectively promoted delivery lines with planes housebuilders, industrial logistics and retail was uses together with renewable energy projects. Sometimes, we'll actually do the direct development on commercial projects provided on a forward sold basis. So we strong mining sites, and then we move further into new projects as Steve mentioned. The new projects tend to be held on options, developed agreements with most agreements where we really actually over the land, we draw it down and we sell it straight through to end users and infrastructure colors basis. So again, it's moving towards the capital line model. In terms of margin conditions in the first half of the year, we obviously it's dominated by those strong rise inflation, which triggered substantial increase in interest rates. This had the result of softening investment yields on certol projects, we saw significant weaker demand from housebuilds, for land and commercial occupiers hand sitting on their hands. However, as we've got through towards H2, what we're seeing is a significant pickup in house builder activity, all the households now back to the market bidding on land. Prices enable to crush you is clearly, they're still suffering from cost inflation, but not able capacity toller increase power prices, but they are actively buying land and go to everybody is back in the market. Corcept players there again, we're seeing seeking book ticks since the beginning of the year in commercial activity. We'll see how that featural contracts being signed. In terms of the CMI half the year. Normally in the first half year, we don't appear heavily on the P&L side because most of our token events are in the second half year some an exception this year with at the sort of normal process. So in the first half, we completed a head of program, GBP 191 square foot logistics unit is our scheme at Unity. That's forward sold where we essentially drew the line straight through underaction to the ultimate funder. We then constructed the unit or fixed price contract with a contractor and will pay trade through from Thunder. So again, our capital deployed and that was minimal. Westfield just after the half year, we completed the sale of a long lease rounds investment on end promote waste plants, as I always feel site in time. This completes the GBP 7.6 million of net cash proceeds. So that will appear in the second half numbers. And then it will be in the same period, we exchanged contracts for the sale of 15 unique residential plot of GBP 4.9 million. That's condition upon planning. We have Maltby approved planning. We're just working our way with the actual timing agreement. They should be completed in the next month, and then that sale will complete again before the end of the year-end. And then finally, Blindwells. We already have additional contract come contracts in place with the bank the sale of large site Blindwells, that will complete in the second half, having a big dose has worked. And so again, that gives us confidence that we expect to achieve we forecast in the market the year-end. The pain on the renewables update on this. Previously, we have flat renewable assets where we had good visibility on the scale of the renewables assets, the timing of when they were going to be delivered and therefore, able to get an external valuation South by between GBP 27 million and GBP 29 million. And since then, we've now got 2 or 3 wind farms in our operational with the soon being under construction. Out of the 6 access agreements that we have to our operational tool and construction and the other 2 are in preconstruction phase. And then we've got 2 matestorae schemes, which are either consented or mined to improve and expect to move into construction phase in the near term. So they're on track really to devalue realized as expected. These assets have lease terms between 28 and 32 years with retarget to get set plus RPI in the case of batches storage and so all the link to trial pricing but with annual like. So effectively, there are annuity grade investments, and we're expecting the first tranche of these renewal assets to be going to market in FY '25, silica 400 megawatts of probably half years in actual assets as a single package. So again, that will start to realize cash from that and we start as we intended. And then interesting, we've significantly expanded beyond those schemes valued by Jens line to expand it. The additional renewable opportunities that we're now working on. So we're literally expecting last August about 800 megawatts of the opportunities. We've got to over 2,000 now and value the mix of battery storage, wind assets and cellular. And Tim scale, those are uncertain in the name at the moment. So we're not really able to give much guidance on when they like to be realized. We need to get the grid connection at confirmed and have a better understanding when the plane will be granted. We're talking really a window between 2027 and 2031, '32, as when they like to actually land on all then, but we expect the majority to and just content side of the GBP 27 million to GBP 29 million valuation that goes like a lot applied. Back to you, Gordon.

Thanks, David. So moving on to the third leg of the business, Germany. So again Stevens given some granularity which I hope felt. Just to recap for those who do not know business -- we effectively got 86% of the value of this business, although we own 49.9%, which changes the accounting principles to use. So we don't have control of this business, although we get 60% of the value. There's 3 parts to it. Carbon Pulverisation Plant is roughly breakeven. The reason for that is it's got to source into the markets where the libraries close in Germany. And they haven't closed yet is the energy crisis in Germany with the problems that happened in Ukraine. So I'll focus on the 2 that are going to drivers at the moment, excoriation but is waiting to the disclosure of the German plant. Trading business. It trades to raw materials around Germany. It's obviously been affected by the fact that Germany is technically in a recession and they're working with 4 day working. So that obviously is impacted on that. DK recycling is a business that recycles waste from steel plants around Europe. And again, I'll explain that in detail in a second. So just over the a -- let's talk about the trading business. Trading business is a business that's been wireline never lost money. The team that they are shareholders. So they aligned with us in terms of delivering value. What happened is one we put these assets in both driving brand and DK, it gain them more opportunities to trade. And therefore we've seen the step up. We also said that, obviously, there will be a lower point and it will come down. And typically, what we said is the extra assets we added brought the base up by about GBP 10 million. And you can see that here, and at a lower point, they typically make about GBP 2 million to GBP 3 million a year in the old business. So add two together, it's sort of bottoming out at about 12%. We think it's about and it gets. First half has been 6, as Stephen said. So it's -- there's no real cycle nature to this. So 6 in the first half, we think the very conservative sits in the second half with 12, and that feeds into why we think is sustainable. The dividend or trading is deliverable. I would expect it to move up back up to cycle again. But it will be oscillating between maybe a 4 or of about 13 up to maybe 20. I mean if you look at the slide the peak were average at 25. So that's the trading business. The really interest will be a bit excited about is DK Recycling. So it's a recycling plant. For those who don't know, it takes still us from steel Fanlive Europe that would otherwise go to landfill. Now the dynamics that are going on here in H1, it depends on alterating. So is the very cyclical product as you can see by the graph. So what's happened is zinc prices have fallen, and that's resulted in a number of zinc mines that produce virgin and think suturing closing because they can't produce at those prices. So the capacity comes, our temperature gets exhausted, prices go back up, and that's what you're seeing. And if you follow any of the zinc come, you'll see people are talking about that. 60% of work for hedged, but remember, 40% is exposed to this. As the prices recover, it will go straight to the bottom line. The second point again, Stephen touched on it is pig iron and coke. So you can see from the graph, they always strongly correlate, which is simple to understand because whoever is producing bigger needs to produce it. So what happened in the past is that they move empty. What happened with the Russian invasion in Ukraine is that the coke that came from Russia under all energy products was embargo. So you have a shortage of coke, which drove the cumene and drive the price of pig iron up. But the problem was there wasn't an embargo on importing Russian pig iron into Europe. So what was happening was the Russians were dumping pig iron into Europe, driving that prices to get foreign exchange. Now after some strong loan will be in you from EU in January of in sanctions. They come in over 3 years, which will embargo pig iron for Russia. On that management was made, we saw prices start to move up, and we expect them to move up again on the back of the embargo started to take part in January of this coming -- in the current are period. Final piece, remember, we take 500 tonnes of dust a year from various steel plants throughout Europe. Actually, there's more dust than we can cope with. So there is a shortage of capacity with any patient you can build with these type of dust. And to give you an example, we took into 3-year contracts, they all come reviewing at December renewal, but they're staggered over 3 years, not all of once. And the advantage we have is we have given customers now ask for a significant increase in gates, those that we did for renewal. And there was a comment from one of them as well. We're not going to take it. We're having a hard time like you are we'll keep prices where they are and that's fine. Then we'll go -- we've got other customers prepared to pay the high gate fee and the response was the one to that has been a partner for long term. And the reinsurer recycling targets if we have to look this. So we achieved an increase in price, which is above inflation on all of the customers came up for renewal. So I think the 3 drivers why we're confident that DK will move back into profit in the H2. ESG is an important point. Different Hargreaves check ages from regulators. Suntreat's not a box-ticking exercise. The important thing is with ESG is the brand differentiator. So as I said that we've invested heavily in ESG, appointed a new Head of ESG. And you might even say was spending that money hold, the answer is because the customers that we are targeting put it into their waiting on our main contracts. So it's not simply about delivering the lowest cost. It's also about what your ESG financial. So we driving the ESG is giving us a brand differentiator, will lead into margin improvement, and you'll see that over the next few years. So over the page, maybe the final bit is hopefully for me. We've taken you step-by-step through this business. The 3 parts of it. Hope assured you that services result is both stable and may improve. But when 2 comes to an end, we have opportunities, which I think will at least keep rate, if not see it grow. Please don't forget the 6 other contracts. Obviously, you might lose 1 or 2, but we hope to win normal lose. So we have to see organic growth there. One of the things that Steve mentioned is the buyout of the pension in Q1. When that happens, that will then make services a much more salable business in the future. And I think the multiple that Stephen applied to it is very realistic. You can come up with your own view at what multiple you apply to that if you do a sum of the parts. That's he used to do. But taking out the pension not only allows us to increase the dividend because we don't have to spend GBP 2 million into pension and also, I think, makes services a much more solid business in the future of overmature. The land, like I said, please remember it's all in a historic cost. I make no excuse to the fact that we have all these assets given our all-coming red group. We invested a lot of money to improve what we could do, and I'm fortunate that David joined the Henriette deliver that value. But now we're moving to a much more capital-light model in the GBP 800 million investment. And therefore, you see the liberation of that money. The other thing I remember just renewable stand we've said in the statement we're going to market in financial year ending '25 with the first tranche. Tranches are always bigger bigger than $10 million in size, quite size of that tranche, we're not clear quite yet. But it's going to be govern to market in FY '25. That is a statement for you. And also it's going to be than GBP 20 million. And therefore, that will already catch part of this GBP 27 million we're talking about. But please remember any value on it today is the other renewals coming out of the track. So hopefully, you can get comfortable because the land isn't market to market, it's a historic cost. So if we get book and renewables to deliver a profit of that land because it is relatively cheap in our books. So I think that's that. In Germany, I can tell you that, as you want, I think if I was valuing Germany, I would look at the trading businesses oooplyebook is it's a lot of very confident individual study is dose potentials that help value. is a much more interesting proposition. It's in the resin space. And you can look at the sustainable EBITDA in terms of inclusion in applying around multiple. But I think recovery in the book value on HRMS is not a difficult stretch for anyone to get a head around. So I think that shows you where we do money from Germany, the money from services. And remember, the venture sees why it's very easy to see. You've got the sustainable dividend of 36p, which allows you to sit down and say, right, on a share price of x. I've got 36p coming. And if I did with some of the parts, there's always other money coming to me. So I can sit and wait on Gordon and this team executes and delivering value on these other assets. Just over the page, what I hope reassure you is we have a very strong Board. Roger McDowell, a lot of you will know, very experienced Chairman. We also have our largest shareholder, Harwood Capital representative on the Board in Nick Mills, which represents 30% of the shares. I personally still over 8% of the group. So again, I think our shareholders and ourselves are very well aligned with the Board. And we have a very strong balance sheet. There is no bankers we said. So again, we don't have to in this next 3 to 5 years when we execute all of this deliver real value for you all. If something happens, we're not in a hurry. So we know the time value of money. So we were probably on to something trying to optimize it against time value of money. And at the same point of view on be pushed into the part that we have to sell anything on the cheap. I do and my teams, John has been to prove to hope that this is a sustainable dividend. There's a lot of hidden intrinsic value here. You can see in the forward pipeline of the way we're going. And I hope it's a very simple business that people can understand with 3 businesses that are in ease be valued. So on that note, I would like to close and open for questions.

[Operator Instructions] I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. [Operator Instructions] Stephen, if I may, sir, I just hand over to you to chair the questions. And if I could just ask you to read them out and then give your responses where it's appropriate to do so, and then I'll pick up from you at the end.

So we had to have 1 plus question, which 1 is could you provide thorough revenue and profit forecast for the following 2 years and the one just ended. I think unfortunately, we're not allowed us to provide step spliced forecasts and listing rules. However, what I would say to the individual fees question and also all of the people on the call. Our next director of the Wallop PR website in their Investor section, they have a 2-page document outlining sort of the key points around Harris and included within that is to a guidance around the questions I just asked. So hopefully, that resolves the question. If you're not able to find it these e-mail Wallboards be able to point in the action. Second question from Sam. When are you paying -- when you're paying 36p a year in dividend, do you expect the net asset value per share to increase or decrease over the coming years? So I think I'll take that one. In terms of the the net asset value, I expect to reduce if we are getting a dividend-based rate than our earnings per share. At that point, we'll be removing value up with the balance sheet. The forecasts that we're seeing so far, 36p per share is less than our forecasted EPS and therefore, I don't expect the if the group's balance sheet to reduce in the coming years as compared to the 36p pointing it should increase because our profits should be a dividend we're paying out. Next question is from Mark. I think Gordon's pass possibly for you. What needs to happen before the tender is issue like size we see because for the networks? Yes. Well, as you can imagine to issue it's held up with the government. But if you follow the press on side, you see there's been more money released to push the project on. We are actually there working as we speak, but it is a government decision. But again, if you follow the press, so I point you towards that, you'll see that Spain at to be in the ground rising in the next couple of years. But we're at the most governments. But remember, HS2, as I said before, has 2 more years left to run. So we're comfortable with that time scale.

Thank you. And next question, I think, is one tool and Tom Lawrence. We'll also ask for new contract wins with build inflation protection, at the company are for a flat fee type in order to do business.

That's very good question. Thank you you for that. Sorry, I missed that because we've been talking to shareholders today. While I'm a chief executive, we will not go for fixed-price contracts as a policy. I think you're all well aware of the disasters that have happened in the construction sector where people have chased revenue and entered into these fixed price contracts. It's the rest of the interest is asked to I'd rather come to you and say, look, revenues down because of this because we didn't find the right type of contracts. So as a % sewer aligned in making sure that we never take fixed price contracts potentially espadisaster.