Good morning and welcome to our 2021 full year results. Before we start this morning, I'd like to introduce Charles Allen, our new Chairman. Charles would just like to say a few words of introduction before we commence the presentation. Charles, the floor is yours.
Leo, thanks very much. Good morning, everyone. Leo's very kindly agreed to be my simultaneous translator if you don't actually understand my Scottish accent, so there'll be subtitles here. Leo, thank you. I've been with the company eight months. It's been a great eight months. I've had the chance to visit 25 of our projects around the country, and I never fail to be impressed by the quality of people that I meet and the complexity of the projects that they make look easy. I'm only frustrated having worked in different sectors, companies like ISS that does facility management making 4%-6%. With all the complexity we have, we make 2%. The big challenge is how do we make it more?
I know Leo has been turning the company around with Phil and the rest of the board. There's a fantastic opportunity to do more and more and more. That's what I keep saying to Leo every board meeting, more and more and more. More profit, that is. Basically, thank you very much for coming along today. The other bit of good news you may have seen is one of the things on my agenda was strengthening the board from a D&I perspective. I'm delighted to say we're bringing on board Louise Hardy, who's a civil engineer. She's been around the sector for a while. She worked on the Olympics. She worked on London Underground. She worked with Bechtel. A wide range of experience, and I'm delighted to get somebody of her caliber joining our board.
That's great news 'cause I think it sends a very strong message externally, but probably more importantly, internally to the ladies we have around the business to say, you know, "You can do this," and, you know, really drive that D&I agenda. It's very important. It's something I've been involved with for thirty-odd years, so particularly pleased with that. Hopefully you'll agree that we've got a very solid set of results today, and that allows us to move into this year with real confidence. Thank you, and enjoy the meeting. Thank you.
Thank you, Charles. In the spirit of inclusiveness and diversity, we went out of our way to ensure that when we chose the chairman, we didn't pick a tall chairman. 'Cause we can't have two of us. So there we are. Anyway, thank you very much, Charles, and very welcome to the company. A great addition to the team. Today, we're gonna look at the results for 2021. I wanna draw your attention to this photograph here for a few seconds. This is truly something which is quite spectacular. It's the inside of the Channel Tunnel. Up on the top left, what you can actually see is a connector cable connecting the French national grid to the U.K. National Grid.
Carries 1 GW of power and effectively serves 1.6 million homes, bi-directional either way. That's the kind of project that we take on and we do. Historically, we took this on at a fixed price lump sum. It did deliver profitably. In future, we'll be taking it on a cost plus basis. Fantastic project and a real feat of engineering. Today, the results. 2021's performance, an excellent year, ahead of expectations, and more importantly, ahead of 2019, which was pre-COVID period. Over the last few years, we've actually transformed Balfour Beatty into what really is a resilient, diversified group, both geographically and the businesses that we actually entertain and the business models within that. Also, the markets that we serve.
As we leave 2021, we go into 2022 with a very high-quality order book with real clear visibility of the future. The mix of that business allows us to actually predict and forecast very accurately. We're pretty confident in our 2022 forecast and expectations. If I think about the markets that we serve, we're largely dominated by the infrastructure market, and we're going into, and I'll show you later in my presentation, almost what I think is gonna be a decade of infrastructure growth, which matches absolutely perfectly with the capability that we have within the company. We also have underpinning our balance sheet and also underpinning our share buyback, our investment portfolio, which is a GBP 1.1 billion asset.
Not only is that an opportunity for us to actually put our negative working capital to work, we've got a very attractive growth portfolio, both in the U.K. and the U.S., that we're actually pursuing. All of these things give me great confidence in that we'll deliver future profitable managed growth, and that underpins the fact that we've increased our share buyback from GBP 100 million- GBP 150 million this year. It's not only the markets that we're in which are really encouraging, but it's actually the platform that we've put in place. When we started Build to Last all those years ago, we talked about creating a foundation for the next 100 years. Well, this is the foundation we've created.
If you think about it, you know, what gets measured gets done, and the things we've got up here are important to us. If I'm looking at U.K. voluntary attrition, prior to 2020, we were down at single digits in the high 9%. You can see that post 2019, we're now up at 14%. What you've seen as a result of COVID is people have a change in lifestyle. You know, they've decided where they wanna work, where they wanna spend their time, and so we've seen some attrition there. We've also seen with the group's capability that there's been a high degree of people attracting people away from Balfour Beatty, sometimes on some ludicrously high packages and the likes of that, which really attests to the way that we train and develop our people.
We've seen attrition rise to about 14%, and that's one of our biggest worries. Interestingly enough, that's despite the fact we've had our highest ever employee satisfaction scores at 76%. The question we ask is, do you see yourself being with Balfour Beatty in 12 months' time? We've had an 86% response rate that says they do. You can see that this is an area we take very, very seriously, 'cause at the end of the day, we are a people business. The other areas that we'd actually look at and manage very carefully is obviously earnings. You can see between 2014-2019, which is pre-COVID, and 2021, we've gone from a loss of GBP 144 million to a profit of GBP 181 million. GBP 181 million beating the pre-COVID levels.
We've put in place an operating platform where effectively it serves the company well. You can see the overhead costs in the business have halved in the last seven years, and they're down over 2019. That reduction is actually largely not due to subsistence and travel and things like that. We will see 226 rising in the next twelve months, although our goal is to really try to keep it to that level. Finally, an astonishing statistic. If you actually look at the average net cash or debt between 2014 and 2021, that's over GBP 1 billion of free cash flow generated from the business, which is a great achievement. If you think about our Build to Last program, it's really gone through three phases. The first phase, if you remember, was actually self-help.
We didn't go out to the shareholders for equity. We used our balance sheets and the asset on the balance sheets in order to fund the turnaround. The second phase, which was 2017- 2019, was we actually used surplus cash to pay down scheduled debt. The third phase, which we're in now, last year and now this year, we've announced a program of share buyback, GBP 150 million last year, GBP 150 million this year, on top of the ordinary dividend. This is actually demonstrated very well in this graph. Here's our self-help period. Here's the period of strengthening the balance sheet and paying down debt. Just under half a billion GBP of cash was put into that. Now here we are returning cash to shareholders, GBP 366 million announced in the program.
If you think about our lean, expert, trusted, and safe, this is an example of trusted to do what we say we will do in terms of delivering returns to shareholders. Very confident about the future. On that note, I'll hand over to Phil.
Thanks, Leo. Morning, everybody. Just get rid of some of this. Let's go to the headline numbers. In 2021, the total underlying profit from operations for the year at GBP 197 million shows a significant improvement from 2020 as Balfour Beatty continued to recover from the pandemic, including recommencing investment asset disposals. We reported profit from operations from the earnings-based businesses of GBP 181 million, a strong rebound from 2020 and ahead of our expectations to be in line with our 2019 pre-pandemic profit of GBP 172 million. Earnings per share in the period of GBP 0.297 pence is significantly ahead of 2020, and more importantly, 11% ahead of our 2019 result.
Both average net cash and year-end net cash increased as positive operating cash flows and significant working capital inflows more than offset the first year of our multi-year share buyback program. Average net cash at GBP 671 million and a year-end net cash of GBP 790 million underpins the group's competitive advantage and supports our long-term capital allocation framework. At the year-end, Balfour Beatty's order book at GBP 16.1 billion and the Directors' valuation at GBP 1.1 billion were both broadly flat with the 2020 year-end. Given these results, the board today is recommending a final dividend of GBP 0.06 per share, giving a total recommended dividend for the year of GBP 0.09 per share. The group is also announcing today a GBP 150 million share buyback for 2022 as the next phase of its multi-year program.
The buyback will commence immediately and is expected to complete during 2022. Going into the numbers in more detail and turning to construction services, the business recorded an underlying profit of GBP 79 million for the year from continued strong performance at Gammon with GBP 30 million of profit, U.S. Construction broadly doubling it, doubling its profit to GBP 51 million as it returned to pre-pandemic levels, and U.K. Construction recording a GBP 2 million loss from operations in the year. The U.K. result was negatively impacted by performance issues at three private residential projects in Central London. One of these projects was completed in 2020, November 2021, with the two remaining projects expected to complete in 2022. Elsewhere, key U.K. infrastructure projects such as HS2, Hinkley, and highways continued to perform well.
In line with our focus on key infrastructure projects, over 90% of U.K. Construction revenue was from public sector and regulated industry clients in the year. Importantly, in the second half of the year, U.K Construction recorded an underlying profit of GBP 21 million at a 1.6% margin. Looking ahead, Balfour Beatty continues to be focused on public sector infrastructure and will no longer bid for fixed-price residential property projects in Central London. Now turning to support services. After several years of repositioning the business to focus on power, road, and rail maintenance, it is now characterized by profitable recurring revenues underpinned by long-term contracts.
We saw significant outperformance in 2021 as profit from operations more than doubled to GBP 102 million as a result of improved performance across the portfolio, the Group's exit from gas and water, and end of contract gains. One of them being the Channel Tunnel project that you saw earlier in Leo's presentation. This repositioning of support services has driven us to set a new margin target range for the business at 6%-8%, upgraded from our prior range of 3%-5%. Specifically for 2022, we expect revenue to be around GBP 900 million following the completion of the gas and water contracts, with the Group targeting our new margin range. Turning to infrastructure investments.
Pre-disposal operating profit in the year increased to GBP 14 million, broadly consistent with the pre-pandemic level. More importantly, in June 2021, the Group recommenced asset disposals with the sale of its stake in the BC Children's Hospital in Canada for the cash consideration of GBP 20 million. In the second half of the year, we sold a bundle of U.K. assets for GBP 48 million and two U.S. multifamily housing projects for GBP 12 million. All transactions were above the Directors' valuation, demonstrating strength of the secondary market for infrastructure assets. The business continues its disciplined approach to target a two-time return on its invested capital as we continue to see good market opportunities. During the year, the Group invested GBP 19 million in new or existing projects.
The four new assets comprise two student accommodation projects, the Vanderbilt University in the U.S. and Royal Holloway in the U.K., and two U.S. multifamily housing projects in Houston, Texas, and San Mateo, Florida. Moving to non-underlying items. This year, there are two items that warrant mentioning given the overall 55 million net charge after taxation. Firstly, in December 2021, Balfour Beatty Communities reached a resolution with the U.S. Department of Justice which brought to a close the DOJ's criminal and civil investigations into work order incentives. Balfour Beatty Communities paid a total resolution amount of $65 million in January 2022. Net of tax and previous provisions, we have recognized GBP 37 million in our 2021 accounts. Secondly, at half year, the Group disclosed a contingent liability for potential rectification works on a development in London.
At year-end, it has been determined that remediation will require replacement of the stone facade. We have taken a GBP 34 million charge net of tax as this is our current best estimate for the remediation. The provision does not include any potential recoveries from third parties. Now, if we move to cash flow, another year of positive cash flow in which we generate an inflow of GBP 209 million, increasing the Group's net cash positions to GBP 790 million. The strong performance was driven by operating cash flows and working capital inflows. Most significant movement in the year was working capital inflows with the following key factors increasing contract assets.
GBP 110 million of advanced payments from major projects in U.K. Construction, GBP 30 million of advanced payments at highways projects in the U.S., and net contract inflows of around GBP 30 million from our closeout of gas and water contracts as we exit from that sector. In addition, trade payables increased GBP 43 million following the introduction of the U.K. VAT domestic reverse charge for the construction sector and the cost of settlement relating to the DOJ resolution, which was, as I said earlier, paid in January 2022. These items were partially offset by the timing of trade creditor payments. Looking ahead, some of this working capital benefit will unwind in the current year as we expect a small working capital outflow with a more material outflow in 2023.
The Group expects negative working capital as a percentage of revenue to normalize between 11%-13% in the medium term. It is over 15% at full year, with the range movement dependent on contract mix and the timing of project starts and completions. Turning to our multi-year capital allocation framework that we launched during 2021. To recap on the main points, our focus is to continue to organically invest in the business where those investments can meet our group hurdle rates, continue to realize strong cash returns from asset disposals, maintain a strong but efficient balance sheet, and that gives us competitive advantage, and deliver a sustainable dividend and additional cash returns to shareholders. Now turning to how the capital allocation framework translates into shareholder returns. The next slide here summarizes our current position.
For 2022, the group expects its earning-based businesses to deliver further profit growth in line with the board's expectations, whilst the infrastructure investments, the group will continue to divest their assets and make new investments in line with its capital allocation framework. For 2023 and beyond, the strength of the group's order book and positive infrastructure markets create the visibility to deliver profitable managed growth and sustainable cash generation. In March 2021, the board reintroduced the dividend at a targeted payout ratio of 40% of underlying profit after tax, excluding gains from investment disposals. The board has declared a full year GBP 0.09 dividend for 2021, higher than at any point under Build to Last. Finally, Balfour Beatty's GBP 150 million share buyback program for 2021 completed during the year.
Today, we announced that we'll buy back a further GBP 150 million in 2022. This will bring our total shareholder returns announced since the start of 2021 to GBP 367 million. Further forward, with its transformed portfolio, the group is confident of delivering significant future shareholder returns in line with its multi-year capital allocation framework. Thank you. I'll now hand you back to Leo.
Perfect. Great. Thanks, Phil. Now let me explain why Phil's confident. First and foremost, we have a geographically and operationally diverse group. We put this in place over the last seven years. We have two distinct parts. We've got our operating businesses and our earnings-based income, and we've got our investment portfolio. Why do they sit together so comfortably? Well, the negative cash flow or negative working capital in our operating business funds, effectively, the investment portfolio and allows us to invest. We're based uniquely in Hong Kong, U.K., and the U.S.A., and anything outside of that is peripheral. We're based in construction services, support services, and those are the two primary businesses that generate most of our returns.
In the investment business, we're split roughly 50/50 U.K., U.S. Again, this underpins our balance sheet to the tune of GBP 1.1 million. Also, the sale of assets will underpin our return of capital to shareholders. This is a good starting point. The one elephant in the room at the moment that's facing the whole industry is that of inflation. I think it's worth putting this up front, and then I'll show you our exposure in terms of our contractual mix in respect of that. Again, we've got two worlds here. We've got the construction services and support services, and we've got the investments. In terms of construction services, we do have quite a lot of contractual protection, and that is where the supply and the sourcing of the material is actually the customer's liability.
Basically, it's a pass-through on cost. We also have protections within this in terms of indexing, whereby there's an adjustment to an index which actually will then allow an inflation cost to come into the P&L. With all of these things, it's never foolproof, and there's also a timing lag. The real trick here is to get onto it early and make sure you're managing it proactively. Other things that we do in terms of protecting against inflation is buying out early, particularly in our U.S. business and our buildings business, which is about $4 billion of revenue.
When I say buy out early, what we do is we get awarded the contract, and then historically, between 90 and 180 days, we'd place all the subcontracts in order to buy out the job and put the risk down to the supply chain. Two months ago, we reduced that to 90 days, and now what we're doing is buying out 85% of the job in effectively 30 days. You have to remember, that sounds great and you've passed on the liability. Even when you've passed on the liability, if your subcontractor chain or part of it goes bankrupt, it's your liability. You have a responsibility to effectively actively manage your supply chain.
What we are seeing with the hyperinflation in oil and some materials is that it's beyond any organization to absorb that, even large FTSE 100 companies. What we're doing is working proactively and responsibly with the supply chain to ensure that that is understood by the customer and that it is resolved with the customer. You know, if you look at the thin margins we make, we don't really have the scope to absorb those sorts of deviations. In effect, it really is about ensuring that the supply chain stays whole and that we're actually managing it with the client and getting them to understand what the risks are. Because you can't afford for your supply chain to fail, otherwise your project doesn't go ahead.
In terms of our investment portfolio, some clouds do have a silver lining. In terms of investments, a lot of our assets, the majority are actually index-linked. In the case of the U.S. and U.S. multifamily housing, it's actually linked to the rate of inflation increases in the rent of the properties. All in all, I think we're quite well-positioned, but this is a very live situation, and it's something that has to be managed on a day-to-day basis. This actually shows you our contractual exposure. If you look back to 2018, the way we've actually transformed the group, apart from actually doubling the backlog or the order book, 50% of our portfolio was exposed to sort of fixed price lump sum in one form or another. Today, that's 14%.
The best protection you can actually have is to have a very limited exposure to that type of work. You can see how dramatically it's reduced. This is important in giving us confidence in that we know that we can forecast how the business is gonna perform in the future. Moving on and looking at the businesses and again, why Phil would be confident is that we've got a very, very strong backlog at the moment. It's dominated by projects such as HS2 and Hinkley Point C. They will actually be growing over the course of the next two to three years, but particularly in 2022 and 2023. Our highways business has performed exceedingly well over the last three or four years.
For those of you who use the M4, the works are coming to an end in April, so you'll be able to get free passage there. What we are seeing is with the delay in smart motorways is that this business will actually start to decline next year. But the growth that we're gonna see in terms of major projects, Old Oak Common and Area North, will actually more than absorb the skills and the capability there. There will be ancillary works that will go on, but not of the type of major infrastructure that we've done with the M4. In terms of our regional business, we're largely working within framework agreements. Again, we're seeing strong backlog and strong growth in our frameworks for the coming years. This is what makes me excited.
This is actually the future pipeline that we're working and bidding at this moment in time. Again, HS2 has the track slab, the catenary. It has the extension up to Crewe and then up to Manchester. We're actively engaged in looking to win all of that work, and we're very well-positioned with the work that we're doing in Birmingham, but also we've got a very high-performance team on HS2. In terms of nuclear and defense, there is the civil nuclear and there is actually the defense nuclear. Both of them are actually huge. Six months ago, there was a question mark whether Sizewell will actually go ahead, Sizewell C. When you think about energy security now and the situation that's going on in the world, it's undoubted in my mind that that will proceed at pace.
Also in the nuclear defense, there's a GBP 6 billion-GBP 8 billion budget that will be spent over the next 10 years in that area as well. We're central to all of those conversations at this time. Decarbonization is a new area we're looking to move into as we clean up the industrial Teesside and Humberside. We were down selected as one of two to deliver to bp a new carbon capture scheme off the Teesside. This again is an exciting area. It's a new area. We're working with Technip Energies in our consortium, and we've got some very good solutions being put forward at this time. Then last year, Lower Thames Crossing, a major highway for us worth probably GBP 2 billion, was delayed.
It will be coming out in the next few months, but again, another big growth prospect here. If all of these were to happen, my prediction is the industry doesn't have the capacity to actually deliver them. This is gonna be an interesting challenge for the next few years for the whole industry. What's also interesting, let alone our capability in these areas, all of our specialist businesses, whether it be temporary works, design and planning, whether it be ground engineering and piling, whether it be a big civil engineering, earthmoving, mechanical, electrical, power transmission, all of these specialist businesses will benefit in these particular projects. We're actually not only are we doing the headline project, but all these businesses will be pulling through a lot of business on the back of that.
A very encouraging picture all around. If I look at support services, you know, I just love this business because whereas we're forecasting 6% -8%, it does have the potential to go way beyond that. The reason is that our capability in these areas are so unique, and we do such a good job. In the area of power, you know, we're currently putting in the transmission on the T-pylons from Hinkley Point C through to the grid. We're up in Scotland connecting to the grid via the Inveraray project. The skills and the capability in this area is really, really unique. At this moment in time, there's two big factors coming into play.
If you look down the East Coast and we look at the green wind farms and how they connect to the grid, that's worth a few billion GBP in terms of onshore transmission. If you look at National Grid's shareholder investor day, you'll see that they're actually forecasting that their CapEx is going to move from GBP 1 billion a year to GBP 2 billion a year in the next five years. A lot of that work is gonna ultimately end up being dependent on the capability of this business. We see strong growth and much better returns than we've had in the past here. In terms of our road maintenance, we have two constituent parts here. We have the M25 concession, and then we have our Living Places, which is local authority roads.
We've been driving the M25 contract for productivity, improving the systems, the processes, and effectively the output of profit and cash. That's produced a strong performance. In the local authority area, we've delivered a consistent return. Now we've just hit a point where these contracts with the local authorities after five and 10 years are now coming out to bid. We've been down selected or shortlisted for Buckinghamshire and Northamptonshire. We're quite encouraged by that. If we win one of those, it'll be a material growth in that business. In terms of the rail maintenance business, London Underground unfortunately doesn't really have a very big budget, even for maintenance these days, and so this business is gonna reduce by 25%-30% this year. It's relatively small in the scale of this portfolio.
However, we're fantastically well-positioned in terms of the Central Rail Systems Alliance, and we made this decision three years ago that we're gonna move all our resources onto maintenance. What's happened in the last three years, all the capital projects have actually slowed and stopped, and all the money has gone into maintenance. We found ourselves very, very well-positioned, and this business has grown for us. The growth here in the next few years is going to be where the existing rail network starts to interface with HS2, and there's a lot of work that's gonna come out through that in terms of connecting the two systems together. Again, we're very well-placed to capitalize on that.
This support services business is not only going to hit the 6%-8% margin, it's also gonna start showing some growth 2022 and beyond. If I look at U.S. construction, again, a tale of sort of two cities here. Our buildings business is performing very, very strong. We're seeing really good recoveries post the pandemic, particularly in the areas of entertainment, airports and leisure. We're also seeing that our branches are based in the Sun Belt. When you look at all of the surveys, eight out of the 10 top growth cities in the United States are in the areas that we actually serve. Geographically, we're very well-positioned. We continue to deliver on the Broward County project.
Broward County is actually also associated with a PPP which we're actively pursuing at the moment, which is in the tune of about $1 billion, and it's the municipal offices which is co-located with this site. We're very encouraged about the progress that we're making there. In terms of the Microsoft campus, that's proceeding at pace. There is a particular challenge at the moment with the Teamsters, and they've been on strike for eight weeks, and there's been no concrete deliveries in Seattle, but that will resolve itself with the passage of time. The other encouraging thing we've seen here, and we just had a recent win for just under $1 billion, is with the federal market. Under the Biden infrastructure spend, federal is now becoming an area that's becoming heavily invested.
We've actually just been selected on a major project in Washington, D.C., which is very, very encouraging for us. Education's a big area for us, and we see the P3 market in America sort of developing that area over the next few years. In the area of civils, we're doing some major projects, the I-635 in Texas, Caltrain in California. Caltrain recently has just gone through a renegotiation for us, where we've achieved a two-year extension on the electrification of that railway, and a $349 million change order for the change in scope.
We've got enough backlog for the next two and a half years in this business, and our concentration here is really around delivering that profitably while we work out how we reposition ourselves to a profitable niche in this business. We've already down-focused in areas of the Carolinas and Texas, so those are the two areas that we deliver roads. We're delivering infrastructure at the LAX Airport and Caltrain in San Francisco. As we deliver those over the next two years, what we will be looking at is what are the profitable niches that we're prepared to risk our capital in the future as we go forward. If I look at Hong Kong, first thing is, we've got a new CEO in charge of Hong Kong. That's Kevin O'Brien.
Kevin was a Balfour Beatty employee 20 years ago, went to Hong Kong. The last three years, he's been the CEO of one of Jardine's businesses. Gammon is a joint venture between Balfour Beatty and Jardine's. Very experienced operator, both in terms of civils and mechanical, electrical, so a good leader and a good addition to the team. We have a strong order book here, about GBP 2.6 billion. All these numbers, by the way, relate to Balfour Beatty's share in pounds. It's split 50/50 between civils and buildings. We've seen in the last couple of years an advance in infrastructure, so that's started to come through to the fore. We've got tremendous credentials here.
We've delivered. These are some of the marquee projects, the Central Kowloon Route, which is a road and a road tunnel connecting East and West Kowloon. We've got the Advanced Manufacturing Center, which is designed to service high-tech, innovative startup companies. We've just completed the M+ Museum building and the Lyric Theatre, which is really the cultural district of Hong Kong. The portfolio at this moment in time is dominated by the airport, over GBP 2 billion worth of business, where we're providing the baggage handling, the people carrier, and also the rebuilding of Terminal 2 and the extension of that. A big contract, very complex, but very well-managed by the team. We've worked for the airport for 20-odd years, so a very good customer.
Hong Kong's been a consistent performer, delivering a dividend of between GBP 25 million and GBP 35 million a year to the portfolio. You can see it's very attractive. If this isn't attractive enough, when you look at the future and where you're going to see the investment, if you look at the proposed land development, these blue circles and the numbers inside represent the amount of hectares of urbanization that's actually gonna go on. Here you have Hong Kong Island down here. This is the Northern Territory. You can actually start to see the amount of investment that's gonna go into re-urbanizing those particular areas. On the left-hand side, what you've got here is the mass transit MTR network, and you can see the existing yellow rail lines and then the proposed lines.
These are tunnels and railways, and again, this is a major infrastructure investment. If you look to Hong Kong for the next 10 years, you're going to see a very interesting growth economy. It is interesting since the Chinese have taken more of a role in Hong Kong. These projects are coming to market much faster. There are some positives that we see associated with that. Looking at our investment portfolio, again, we've got a new CEO in charge of our investment portfolio. That's Gavin Russell. Gavin is eight years with Balfour Beatty. He used to be the group controller. The last two years, he's the Finance Director for the investments business, and we've now moved him in as the CEO of the business.
Brings great intellect, energy, and he's already started very fast. The unique characteristic about this business is we've got under one roof the project financing expertise, we've got the management of the operational asset, and also the construction capability. All of that allows us to actually manage and understand risk. The idea that we can operate and maintain these assets means we can hold them till such time that we feel we've got the maximum value. This portfolio is a natural home for the negative working capital that we carry on the balance sheet. Some exciting growth things that are going on in the U.K. at this moment in time, just circa 3,000 student accommodation rooms that we're building and commencing to build. That will run over the next four years. That's the University of Sussex and Royal Holloway.
We've got the P3 that's going on in Los Angeles Airport at this moment in time. If you ever go through the airport, it's transformational, the rate and the speed at which this is going up. This will be completed in the first quarter of 2024. A stunning project. As I said, you know, it's a high ROI business for us, great home for negative working capital. Portfolio is positively correlated with inflation, so we have inflation indexes within the contracts and on the revenue. Again, as I said, the disposal underpins our share buyback program. Just a comment on sustainability. We launched our strategy a year ago in terms of building new futures in net zero carbon, we're looking to go beyond zero carbon. Materials, we're looking at zero waste.
The communities, how do we positively impact more than 1 million people? In 2030, we've now said that we're going to align around science-based targets. We're going to look to a 40% waste reduction and also 3 billion of social value as measured by the TOMs indices. We've made great progress in that what we will be doing is early, I think in the first half, we'll actually be publishing our targets, and that's a major step forward in terms of this initiative. In terms of recycling materials, you know, one of our statistics here is that we've recycled, repurposed, and reused 99% of what would have gone to landfill on our HS2 project. I mean, that's a phenomenal statistic.
The thing that's interesting about this is a lot of people think about it in terms of, well, this is the right thing to do. The reality is, this actually does add to the bottom line if you do it right. The idea is that we're very pragmatic about we're not doing this because the good cause. We're doing this because we make money from it. Then communities, you know, what we do around the 5% Club and actually ensuring local supply chains and people get paid early is really important. We're well-positioned to capitalize on what is effectively the green infrastructure growth. Really in summary, when you look at all of that, I mean, and our balance sheet and our investment business, we're really well positioned for 2022.
We've got a transformed group where we understand the risk, and we've got confidence in terms of what we can forecast. We've got clear visibility over the next, I'd say almost 18 months. We've got a market which is catering to our capability and is a decade of infrastructure growth. I mean, this is a great place to be at this time, and it really underpins our confidence that we can comfortably return GBP 150 million of share buyback to our shareholders. On that note, we'll turn to Q&A. We're going to run the Q&A in the room first, and then we're going to take people coming in on video conference. Joe, over to you.
Thank you. Good morning. Joe Brent at Liberum. Three questions, if I may. On the U.K. margin, you give the H2 level of 1.6%. Could you give an indication of when that can get to 2%, if anything held it back in the second half? Secondly, I'd be very interested to hear your view of what you're gonna reinvest into the investment businesses as a sort of target. Thirdly, on fixed-price contracts, you've clearly reduced that figure over time. Do you think we'll get to a point at any point where there's no fixed-price contracts, or is it always acceptable to have some because they have a different risk profile?
I'll give the first two easy ones to Phil, and I'll do the third one.
Okay. They're easy ones. Next year, we're going to be back in our U.K. Construction margins 2%-3%. Number two, investments, you know, are, as we've said previously, we're targeting around about GBP 50 million a year into the Investments business. That could come up or go down depending on the opportunities. As I said earlier, we're very disciplined in making sure we get the right returns out of that business. You should anticipate about GBP 50 million a year. We already have commitments out in future years that will probably go over that GBP 50 million.
Your third point, if we got to zero fixed-price contracts, I'd contest that we're not taking enough risk in the portfolio. I think it's healthy to have some fixed price work for two reasons. One is it pushes you to your limit, but also it forces you to be very commercially strong. You know, if everything was cost plus, you could get very lazy.
Thanks. Jonny Coubrough at Numis. Three questions from me please. Firstly, in terms of the overheads which you showed there have gone down again over the last two years. Would you expect those to go up in line with revenue growth? And also whether you'd expect any impact from wage inflation there. The second one would be on the buildings business in North America. You mentioned in the statement that tendering is back to pre-pandemic levels. Have you seen any signs there that cost inflation might be impacting customer decision-making in terms of driving up project costs? The third one would be on the Hong Kong business, which is showing clearly good order book growth over the last year.
You set out there the market opportunity, but I'd be keen to hear if you're seeing any change in the competitive environment based on the political changes. Thanks very much.
Okay. I'll take the first one. I think it was 226 was the number, but I think we said that we probably will see that rise. I think the challenge to management is how do you stop it rising? It's not only wage inflation, as people have worked from home and not traveled, there hasn't been subsistence and the likes of that. That's now starting to creep back in. So under that circumstance, we will see that increase, but the idea is how do we minimize that increase? In terms of the third one, in Hong Kong and the market opportunity, I think as you start to look at Hong Kong, what we're seeing over there at the moment is we're seeing turnover rates in employees of about 20%.
You know, if you look at the ambition versus the capability, you know, I don't think there's enough capability in the region to deliver all of those projects. I think what you'll see is that market will continue to grow for us, but we're being squeezed. I think your demand is gonna way out exceed your supply. That, if the economics works, means we should start to see margins improve over time in that area. The second one was buildings North America, the pandemic and cost inflation. We are seeing cost inflation in the U.S. Our mitigation at this moment in time is to ensure that we actually buy projects out as early as possible to fix the price.
However, as prices do rise, it does impact on the decision as to whether people will go or not go. You'll see that projects will actually get delayed and canceled on the back of that. There's no doubt about it. Now, I think the other thing about inflation is first and foremost, you know, this may be temporary. What we're looking at today, we don't want to overreact to it either, and I think there are other people that will take the same view. You do have to take a long-term mindset on these things.
Thank you very much. It's Pam Liu from Morgan Stanley. I have two questions, please. The first one is regarding infrastructure investment. In the U.S., with the military housing investigation with the DOJ behind you, which allow you to move on, what's next for the U.S. military housing portfolio you have? Is that to hold? Is that to divest? What are the buyers', potential buyers' universe look like? Who are the owners of these assets in your view? And then onto P3 education, can you talk about pipeline? How many projects are there of value? And if you can't talk about pipeline, maybe talk about, how your team on the ground goes about to find these projects and evaluating them, and who are your competitor in this space? It's fine. The second question is coming back to construction.
I think you talk about inflation management already, but I'm wondering whether you're seeing any potential issues with availability, so any potential issue with availability of a product that may impact schedule to delivery. Thank you.
Do you want to do the military housing one, or do you want me to?
We can both have a go if you want.
All right then. You go first.
Look, the military housing portfolio is a very big part of our investment thesis. If you look at our Directors' valuation at the end of the year, actually military housing valuation went up. That's on the back of strong growth in rentals in military housing. We see the asset as being able to grow, so we're currently in conversations with the army around refinancing certain assets to free up cash to build more houses. That's one thing that we're actively doing, and we're also actively looking at acquiring other military housing assets in the U.S. The, if you like, potential for others in the market, there's quite a deep, I would say, investment community that would be interested in a military housing asset.
At the moment, our key here is to one ensure that we, with the monitor that we're bringing in, get them bedded in, get the business refocused on doing what it needs to do for our military service personnel and growing that business.
Yeah. I think, you know, military housing represents an exciting opportunity. It does have via rental increases, a link and strong correlation to inflation. And as Phil says, you know, it's valued about $500 million, so a very important asset. In terms of P3 education, the first P3 in the U.S. was Prince George's County in Washington, D.C. district. That's already gone ahead. It's gone through the process. It's now into execution. Sorry, Prince George's County will be doing more parts of its school. That would be the first one, and again, we've got a branch in that area. What you're seeing is, I don't think you're gonna see that education P3 is gonna sort of pop out like a jack-in-the-box tomorrow.
I think it's gonna be a slow burn because they're learning the rules, how to bid it, and how to put it together. Where we've got strength is education is a really core business for us. We dominate the Southern California market. We think in the next five to 10 years that most all education will go through this route of P3. We're well-positioned because we have the team on the ground that understands the financing. We have the team on the ground that know how to cost and bid it, and we have the team on the ground that knows how to deliver it, and we've got the team on the ground that knows how to maintain and manage it. I think we're well-positioned for that business. But it is early days. Finally, availability of materials.
I'm racking my brain, particularly in the U.S., in that, you know, we had more scarcity of materials six months ago, whatever, but at the moment, I haven't heard. I can't think of where it's a crisis anywhere for us at this time. Rebar is always a challenge. It is in the U.K., but nothing comes to mind in terms of critical shortage. Apart from the Teamsters strike in Seattle, where no concrete has been delivered in Seattle for I think it's eight to nine weeks, and the strike hasn't finished yet. On the Microsoft project, we, i.e., Microsoft, have instructed us to lay off 900 people because they can't do any work without any concrete. But that will come back, and it will restore itself. Anything on materials?
No. I'm good. Fine. Next question.
I've got the mic, so I'll.
I'll give it a go, Craig. I'm Gregor Kuglitsch from UBS. Maybe, I guess, three or four, and maybe there are sort of some of the details that are a bit longer term. I mean, coming back to Hong Kong as a sort of risk. I mean, obviously it's a good business, but politically, could it become sort of a problem at some point in the future? And isn't therefore perhaps one idea to divest it when the sun is shining rather than waiting if something bad happens? The second question is sort of on working capital. I think you mentioned several times that you use sort of the negative working capital and stick it into investment.
In reality, it's very partially true, but you also have a very vast cash pile, which probably is part of that in, I think, GBP 700 million versus a sort of GBP 1 billion negative working capital. I guess the question is. I guess it's could you reduce that? Are you reducing that to sort of make that a true investment of working capital into the investment portfolio, which is sort of what you're saying you're doing, but in reality, there's actually a cash component that's probably 70% of that. The third question is sort of and perhaps with reference to the Chairman's introduction around the margin and, you know, why is this industry making 2% and not, I think, 4%-6%, which other bits of the industry make. I guess, is this.
I mean, it's always been one of those things, but do you see any pathway that will change? If so, how? Then maybe the fourth and final question, and maybe a slightly personal one, so I think you've been here around with the company for, I think it's seven or eight years.
Seven.
Right. I'd be interested to hear your sort of enthusiasm for sticking around for the next seven years. Thank you.
Well, I'll let Phil answer that one.
You probably don't wanna hear what I think.
Yeah.
Well, let's, if you don't mind, on the Hong Kong one. Look, as a board, we obviously consider political risk, and these are sort of one-on-one decisions. You'll have to appreciate it, we are a true equity holder in a 50%, as a 50% joint venture holder. You know, we're not blind to what's going on in the world. Again, it is a decision that, you know, will be made over time. We've got a great business there. It's really leading edge, and as you say, it's performing fantastically well. For the moment, it's a hold, but, you know, never say never. You just don't know. We're not blind to it at all.
In terms of the vast cash pile, I was gonna give a slightly facetious answer, which I will give now, and that is that if we buy back any more shares, there's gonna be nothing left for you to buy. The fact is, I think our buyback is appropriate. It matches all the constraints around what we can do in terms of not you know creating the wrong sort of market. It's cash that we can afford. As we develop more cash, which you'll see coming from operations in terms of better cash-backed profits in the future, we'll be more comfortable in giving more back.
I think if you don't think about it in terms of return to shareholders, think of it about the whole seven years in terms of the self-help. We didn't call for equity, the paying down of debt. Now the return of capital. I mean, fantastic achievement and story, especially if you think in 2014, we were about to be taken over by Carillion. You know, look at how the fortunes have differed. In terms of my energy, enthusiasm and propensity to wanna stay another seven years, what do you think?
Annoyingly so, yes.
Look, I get up every morning. I've got the best job in my view, in the country. I get paid for doing it, which is scurrilous, you know. You know, I love it. Apart from that, I'm sort of totally all in, so to speak.
The margin.
Oh, the margin. Oh, you want me to answer that one too? Phil.
Oh, yeah. You are annoying then. I think there is a path. I think the path is around the risk transfer into contractually things that we've done on HS2 and this whole idea around moderated fee. Because the thing that always gets you and what gets us down to those margins is the, if you like, the unknown risks and the unexpected risks. If you can take that variability out, then I think there is a path to have better margins and probably more consistent higher margins. It has to come with that realization from the customer that there needs to be a better share of risk. Which I think we've moved some way, as Leo's demonstrated.
I think what's interesting is that, I've always maintained this should be a 5% business, and today, Phil has proved me wrong. When we get to 5%, I'll resign on that day. Looks like an upgrade for 2022 then.
Thank you. This is Marcin Wojtal from Bank of America. The first question is on your civil construction business in the U.S. I was under the impression that it's probably not performing as well as you would like it to perform. Can you give us a little bit more detail? Is it profitable? Are you planning to restructure it or downsize it, or maybe even you're contemplating an exit from that? On some of the opportunities in the U.K., the Sizewell nuclear power plant, I mean, you mentioned GBP 20 billion, but how much of that is actually an addressable market for Balfour Beatty? And maybe can you give us some examples of what you're doing in the defense sector? What is your capability there?
Lastly, something that was not discussed today, but do you see any exposure at all to the cladding crisis for Balfour Beatty, obviously in the U.K.? Because I believe you have delivered some residential towers, so can you give us some reassurance here? Thank you.
Okay. I'll do U.S. civils, I'll do nuclear, I'll do defense, and you do the cladding.
Yeah.
U.S. civils. Statement of fact, U.S. civils in the 25 years we've owned it has not returned a dividend to the company. On that basis, we've been restructuring, repositioning that for the last three years, 'cause these are long cycle projects. I don't want to tempt fate, but 2022 will, I think, be the first year where there'll be a material profit from our civils business. It's taken a long time to get there. Also remember, in the case of gas and water for the last three years in our support services was losing GBP 1 million a month for a contract that was signed in 2014 that we couldn't exit. You know, these long tails.
The civils business, a very focused strategy in terms of Texas, the Carolinas, and California, the airport and Caltrain. We are looking at, you know, what is the right strategy for that business going forward. It's about being very selective. The good news is it's a massive rising tide in terms of infrastructure spend. We've got the choice to be quite selective in what we choose to do as we go forward. We do have really good capability. We have great people. It's just what we've got to do is learn how to make money in that business on a consistent, sustainable basis. In terms of nuclear, both defense and civil, I'm just gonna pull a number out of the sky. Let's assume that Sizewell is GBP 20 billion.
I would say that we would be conservatively 10% of that. There's a sense. In terms of what we also do, we're inside AWE, which is the Atomic Weapons Establishment, where we're building out labs and administrative offices. We're working in some of the docks and repurposing some of the docks, and the likes of that. You know, the nuclear defense nuclear is a large growth market, and the budget is literally between GBP 6 billion and GBP 8 billion, which I now think will be GBP 8 billion, and the acceleration in that area will be dramatic.
The thing I would point out is that without Balfour Beatty, it was gonna be very difficult for Sizewell to go forward because the capability and our size and scale means that you almost have to have Balfour Beatty as a partner and also our balance sheet. Again, the same with nuclear defense. In terms of exposure, do you want to just kind of touch on that?
Yeah, no, I'll do it. Martin, you're right. We've got a very small residential portfolio. At the moment, we have a small number of inquiries in from building owners, which we're working through. We're not currently providing anything specifically on cladding, so we don't see it as a material risk at this point.
Oh, you got some questions. We're now taking some questions over the Teams or Zoom.
Yes. We're going to take questions from the conference call now.
Oh, that was-
Thank you. Our first question is from Andrew Nussey from Peel Hunt. Andrew, your line is open. Please go ahead.
Yeah, good morning, guys. A couple of questions from me. First of all, if we look at the second half U.K. Construction margin, so 1.6%, clearly not sort of industry leading. Just really what reassurance can you give us in terms of when we look into FY 2022 in terms of recovery in that margin as implied by sort of the guidance you're giving for the earnings-based businesses? And secondly, in the U.S. and the buildings business, and really taking on board your comments, Leo, around inflation pass-through, have you seen any particular pressures within the supply chain and where you've had to wear maybe some insolvencies and really leading into that discussion with your clients? Or is that more just a flag of something which may occur rather than something you're beginning to experience?
Thank you.
I'll handle the insolvency. You do the 2% or the 1.6%.
Andrew, yeah. The, you know, clearly we've said in our outlook and we've said today that we're, you know, we expect to continue to grow profitably in 2022 with our expectations. I don't think we see an issue in terms of achieving where we want to get to in U.K. Construction for next year, which clearly is going to be back into our stated ranges of 2%-3%. That's, I think, is clear. I don't know if you wanna handle the U.S. one.
No, I agree with Phil. I mean, we've got a good backlog. We know the margin and the backlog. So I think we've got a high degree of confidence in the forecast of 2022. In terms of the insolvency, I think you're right, Andrew. It was more flagging it. One of the things that we did about four years ago is we put in a risk committee which actually looks at and vets the subcontract supply chain.
Rather than if I go back to 2014, 2015, where the subcontractor was selected on being the lowest price, what we're really doing is we've got a system in place where we look very carefully at the credibility of the subcontractor to deliver on the job, the financial balance sheet they've got, et cetera. To that strength, I don't recall having a conversation about a bankruptcy in our supply chain outside of the one in Nashville. This was 2016.
Yeah, two years ago.
No, I don't. The other thing, by the way, in the U.S., the way it contracts is we'll place our order with the customer. We will then pass it out to a subcontract base. That base will either be bonded or with Subguard, which means that if a subcontractor does go broke, the insurance company will chip in in order to fund and pay for the job to completion. Allow me to assure you, even if someone comes along and pays all the money to complete the job, that is not an ideal situation. Getting the subs right in the first place is really critical. That's been an initiative that we've gone into in great detail since 2016 and beyond.
I think we've got quite a robust process and quite a good track record in terms of performance.
Yeah. That's great. Thank you.
That's it. Done.
No. Great. Look, thank you all very much for coming and listening online and look forward to seeing you for another checkup in six months. Thank you.