Earnings Call: H1 2021

Jul 22, 2021

Good morning, everybody, and welcome to our 2021 interim results. I'm joined here this morning by James Brotherton, our CFO. We will run through the presentation and then open things up into a Q and A session. In terms of highlights, Breden's delivered a strong performance in the first half. This despite the partial lockdown of the construction sector in the Q1 in the Republic of Ireland. In parallel to recovering the business post lockdown, our focus has continued on integrating the CEMEX acquisition into our GB business, and I am pleased to report that this is ahead of schedule, and progressing our sustainability strategy, the detail of which I will update you on later in the presentation. The improved performance, along with strong balance sheet management, has led to a material reduction in leverage, which now stands at 1.2x. We have always flagged the highly cash generative nature of Bredin and have consistently demonstrated this. Interestingly, when we announced the acquisition of CEMEX in January last year, pre COVID, we said we would reduce leverage to below 1 in 2022, something that we remain on track to achieve. We have also been busy on the refinancing front. And I'm pleased to say we now have a balance sheet with diversified sources of credit and significant capacity, and James will update you further on this. We are also pleased to announce our first dividend and are committed to a progressive dividend policy going forward. Finally, on the back of the first half's performance, current trading and improved visibility, we expect underlying earnings for the full year to be at the top end of market expectations. I'll pass you on to James now to run through his financial review. Good morning, everyone. We've had a strong first half with group revenue up 79% compared with half one twenty twenty and on a like for like basis when compared with the more relevant trading comparative of H1 twenty nineteen, up by some 17%, and the like for like adjustment principally relates to the CEMEX assets. We recorded EBIT of £56,400,000 again significantly ahead of H1 2020 and H1 2019 on both a recorded and a like for like basis. And this translates into an underlying operating margin for the first half of 9.4%. On a statutory basis, our profit before tax was $46,200,000 leading to underlying earnings per share of 1.54p in the first half. This is lower than you might ordinarily expect and reflects the non cash deferred tax charge of £14,400,000 applied during the period to reflect the increase in U. K. Corporation tax rates from April 2023, which has now been substantively enacted. We had better than expected first half with regards to cash and generated free cash flow of £34,300,000 This represents a conversion rate from underlying EBIT into free cash flow of over 60% compared with 34% in H1 2019. The cash generation was helped by the strong trading performance, good control of working capital and benefited from the phasing of CapEx spend within the year. This, in turn, has led to net debt of €291,500,000 at the half year, with covenant leverage of 1.2x, significantly lower than the year end position of 1.8x. For reference, the pro form a opening covenant leverage on the date we acquired the CEMEX assets was 2.8 times. So in the past 11 months, our covenant leverage has reduced by some 1.6 turns of EBITDA. Our return on invested capital has recovered to 9 point 2%, which is the highest it has been for some 3 years. Bear in mind that both the covenant leverage and ROIC KPIs are measured on a trailing 12 months basis, and so have benefited from 2 successive halves of very strong profitability. And we've declared our 1st interim dividend of 0.5p per share, which is just over 3x covered by the underlying interim earnings per share. Turning to the next slide. We've seen good progression in underlying trading across each of the divisions, with momentum continuing to build through the first half of this year. The half on half comparison with half one twenty twenty shows the significant recovery that we would expect, but there is also encouraging progression on a like for like basis against 2019 across the group as a whole, with only Ireland lagging the H2 2020 like for like growth rate. And bear in mind that Ireland had a notably strong second half in 2020. The recovery in both revenue and profitability has been led by the group's growth engine that is GB Materials. The division has clearly benefited from the soft comparables, but it's been good to see the business continue to perform and the first half initial contribution come through from the CEMEX acquisition. Growth in GB in the period has predominantly been volume led, with some aggregates pricing coming through as the half progressed. The Irish performance is particularly encouraging given the lockdown at the start of the year, and that business has good momentum coming into the second half. And Cement has clearly benefited from the strong market demand. In terms of divisional performance, Slide 7 shows the progress that each of the divisions and the group has made both year on year, but also against that 2019 first half. In GB, the margin is a bit behind where you might expect it to be, and there are a few factors behind this. First, the CEMEX acquisition remains dilutive to the overall GB margins, and that will remain the case for the remainder of 2021. 2nd, the business has experienced higher input costs, which haven't yet been fully recovered. Although given market conditions and our pricing activity in the first half, we remain confident that these will be recovered as the year unfolds. And finally, ready mix volumes haven't seen the same recovery in volumes that other parts of the business have seen in the year to date. In terms of Ireland, the Irish business is well positioned. And given the headwinds to the Irish economy at the start of the year, the first half performance is particularly encouraging. When looking at profitability in the Cement division, bear in mind that we have completed all 3 shutdowns, 2 at Hope and 1 at Kinnegrad during the first half compared with only 2 in the first half of last year. Each shutdown takes one kiln out for around a month, and we estimate represents an opportunity cost to the business of around £2,500,000 We have no further shutdowns scheduled for the division in the second half of this year. That brings us to an overall group underlying EBIT margin of 9.4 percent, which on a like for like basis is equivalent to 10.5%, slightly behind the 11.1% we delivered in the first half of twenty nineteen, but considerably improved on where the business was just some 12 months ago. Looking now at input cost pressures. Input cost and distribution pressures across the wider building materials space have been well documented, and we're no exception to these trends. We've seen some lags in input cost recovery, particularly in the GB Materials business, as just referenced, but given the generally supportive market conditions, we'd expect to recover these over time. As a reminder, we try to progressively hedge our energy costs for at least 12 months ahead, and we purchase our bitumen according to the trading profile of the group. You'll all be aware that the UK emissions trading scheme commenced earlier year, and we've now secured the necessary carbon allowance for the UK business, such that we are fully covered for the 2021 production year at both Hope and at Kinnegan. I touched earlier on this very strong cash performance and cash conversion of the group in the first half. As expected, we saw a reasonably significant working capital outflow during the period, £12,000,000 of which related to VAT payments automatically deferred from last year, with the balance due to the growth in net receivables as a function of our strong trading. Given overall market levels of trading, we feel that the risk of receivables default is higher than it was some 12 or 18 months ago, and we'll remain close to our customers through the second half to manage this as best we can. Bad debt written off in the first half was minimal. And as a reminder, we maintain credit insurance across the substantial majority of our private sector receivables exposure. Cash tax paid was slightly lower than expected due to the impact of the super deduction and net CapEx was lower due to phasing. At the half year, we have over £50,000,000 of additional capital projects approved across the businesses and moving through procurement processes. Acquisitions include the Small Express Mini Mix transaction as well as the final piece of deferred consideration in relation to the CEMEX acquisition. All of this brings us back to net debt at the half year of £291,500,000 some £27,000,000 lower than at the full year and well positioned for the second half. You will recall that the Group's banking facilities were due to expire in April 2022. And so we spent a good deal of time in the first half working on the refinancing of those facilities. Our new facilities that we've announced today comprise a £350,000,000 unsecured revolving credit facility with 9 participating banks and a £250,000,000 U. S. Private placement, which will be drawn down during the course of the second half. The U. S. Private placement means that for the first time, Breeden has a borrowing profile that goes out beyond the near term time horizon. And we're really pleased with the quality of investors who've expressed interest in being a long term partner of the group. The fixed pricing that we have secured over periods of between 7 15 years, and the levels of demand, with the initial offering of the USPP being more than 10 times oversubscribed. These new facilities give us balance sheet certainty at attractive rates and significant flexibility with our effective committed debt headroom today of over £350,000,000 before taking account of our option over the £70,000,000 accordion. We've confirmed our first dividend payment today of 0.5p per share as well as the Board's commitment to a progressive dividend policy, targeting a payout ratio of 40% of underlying earnings over time. I think it's important to stress today that our capital allocation priorities remain unchanged. We will always prioritize the strong balance sheet that has given us the flexibility to pursue growth opportunities as they arise, whether that's through organic investment back into the business, in people, equipment or resources, or through selective acquisitions. And over the past 5 years, we have consistently demonstrated the Group's ability to absorb significant acquisitions and reduce leverage in a short period of time thereafter. In this context, a modest but committed and progressive return of cash to shareholders will help broaden the universe of institutional investors who can invest in Breden as well as providing an income stream for our retail investors without compromising our ability to invest where we see value for all shareholders. Slide 13 updates the technical guidance that we issued in March. For the full year, we expect an interest expense of around £15,000,000 which will include the write off of fees and expenses in relation to the old debt facility of some £1,200,000 We have a blended tax rate of around 18%, which you can also apply to the 2022 financial year. We've now completed the detailed analysis of the deferred tax impact of the rate change from 19% to 25%, and the non cash tax charge is slightly smaller than we'd originally thought back in March, reflecting the fact that some of those deferred tax balances will unwind at the lower Corporation tax rate over the course of the next 2 years. Our working capital out flow guidance remains unchanged at £40,000,000 for the year as a whole, although as ever, this will depend in part on how deep into December our trading goes. We guided to £70,000,000 of CapEx in the year back in March. And since then, we've committed in principle to an incremental £30,000,000 of capital expenditure over the next 2 years to take advantage of the super deduction. For modeling purposes, you can assume that this increment is phased fifty-fifty, so overall CapEx spend for this year of £85,000,000 and the same for next. Finally, the dividend will cost us around £8,400,000 this year, and that should lead you to a year end net debt number of around £270,000,000 ignoring any M and A that may come through in the course of the second half. And with that, I'll hand you back to Rob, who will talk you through the divisional and operational performances. Thank you. Thanks, James. In terms of markets, the U. K. Economy has rebounded more strongly than expected a few months ago. For construction, it has very much been a V shaped recovery, driven by infrastructure and housing. Confidence has been improving and is now high, as can be seen from the June construction PMI of 66, which is the highest since 1997. By subsector, housing demand continues to be strong and the major housebuilders appear confident. And the infrastructure demand remains strong. This bodes well for Breden given the end use we have. There are some market concerns about materials, mainly imported, and skill shortages. Whilst we are not significantly exposed to imported materials, these are risks that we are proactively managing. Turning to the Republic of Ireland. Given the additional lockdown in the Q1 in respect of non essential construction, the shape of the recovery there will be a W versus the UK's V. However, activity levels have picked up strongly since April. And in addition, like the UK, confidence is high, as can be seen from the June construction PMI of 65, which is one of the strongest since the survey began 21 years ago. Lastly, construction forecasts for 2021 are impacted by the Q1's partial lockdown, which was actually longer than the initial one in 2020. Turning to the business reviews and GB. As already highlighted in the U. K. Market backdrop, we have seen a continued recovery of demand in GB, and this is reflected in the division's performance. The integration of PecEMEX assets is now largely behind us, and we are now focused on optimizing these assets. We continue to have had no negative surprises, and we believe that there is no structural reason to prevent us restoring historical levels of profitability over time. Lastly, last year, we appointed the 1st Managing Director of the contracting business in GB, reflecting the growing importance of contracting as a route to market for our expanding asphalt production capacity. And we have made good progress executing our plans in the first half. In Ireland, after the slower start to the year because of the additional lockdown in the Republic of Ireland, we saw good demand for our products and services in the Q2. In addition, we have made further progress in developing our aggregates business in the Republic of Ireland with the reopening of Longford Quarry, this being one of the dormant quarries that came with the Lagan acquisition. In terms of contracting, I'm also pleased to be able to confirm that we have just received a letter of intent from the main contractor in respect of the resurfacing of Cork Airport. Cement experienced significant volume increases in both the U. K. And Irish markets during the first half. This, coupled with us undertaking all three of our planned maintenance shutdowns in the first half, has required us to work closely with customers to maintain supply levels. I am pleased to report that our team managed this challenge well and that with this year's planned shutdowns completed, we are well set for the second half. We have also continued to focus on increasing the use of alternative fuels, and I am pleased to report that our kindergarten plant in Ireland reached 76% in the first half, up from 71% in 2020. This is an outstanding achievement. We continued to progress M and A opportunities. And during the first half, we acquired Express Mini Mix, which was a classic breed and bolt on that expands our footprint and increases our vertical integration opportunities. The focus over the last year has been about deleveraging post the CEMEX acquisition. But given where we are now in respect of that, I am pleased to report that we have an encouraging pipeline. We have also made good progress on our strategic initiatives in the first half. Using the three pillars of our strategy, I wanted to share some examples of this progress with you. Under our sustained pillar, we have progressed our sustainability strategy, which I will come on to talk about shortly, achieved improved overall employee engagement in the latest survey, and our Cement division has achieved an improved and excellent Net Promoter Score in its latest customer survey. Under our optimized pillar, the CEMEX integration is ahead of schedule. We have reopened SHAP, a rail link dormant quarry in Cumbria we acquired with CEMEX and are investing in a new rail siding in North Wales to facilitate the distribution of Welsh slate byproducts. Lastly, in respect of expand, we have secured additional reserves at Whitwar, a key quarry near Bristol, acquired Express Mini Mix and are executing our contracting strategy in GB. Turning to sustainability. Building on the stakeholder engagement and materiality assessment work undertaken last year, we have rolled out policies to set standards across the group in relation to our key sustainability focus areas. We have also mapped our key focus areas against the UN Sustainable Development Goals to ensure alignment. Lastly, we have also consolidated the key focus areas into 3 ESG themes relating to the planet, people and places. Under these three themes, KPIs have been identified. Under planet, these KPIs cover areas including carbon reduction, waste reduction and biodiversity. Under People, they cover our workforce and the impact we have on the communities in which we operate. And in places, they cover products and solutions. Our sustainability strategy is underpinned by fundamental operating principles. In short, good governance. We will brief you more comprehensively on our KPIs and communicate our targets at a Capital Markets event in the autumn. We will also at that time share with you our road map to 2,050 and update you on our thinking about an appropriate ESG disclosure framework for us to adopt. In summary, we've had a strong first half. And given demand for new housing is strong and both the U. K. And Irish governments are committed to infrastructure spending, we now expect underlying earnings for the year to be at the top end of market expectations. And we look forward to the future with confidence and a strong balance sheet and to updating you on our sustainability plans at the Capital Markets event in the autumn. Lastly, I wanted to recognize the part played by our colleagues in getting us to where we are today. March 2020 seems a long time ago. It is they who have made this happen. And on behalf of the Board, I would like to thank them. That ends the formal part of the presentation, and we now open up to questions. Thank you. Thanks, Rob. Okay. So we'll now move on to questions. If you would like to ask a question, if you could raise your hand and then we will take your questions. We'll introduce you 1 by 1. So first of all, could we take a question from Christian Hjorth at Numis. Three questions from me, if that's okay. James, you sort of ran through some of the reasons why the margin perhaps in H1 was a bit lower than one might expect. A lot of those sort of seem temporary in nature. As a result, if we sort of look forward over the next sort of, let's say, 12, 18 months, would we expect to see any sort of revenue growth versus 2019 to be more in line with the normal reading drop through or some of those things may be a bit longer lasting? The second one is just if you could touch a little bit maybe on some of the organic growth opportunities that you discussed. For example, I know opening quarries in the Republic of Ireland was a big part of the in the lagging deal. Some of the higher CapEx that you're looking to spend and the paybacks around that and also on the contracting? That would be really helpful. Thank you. Thanks, Kristen. So I mean, in terms the margin, I talked through the factors behind the slightly lower GB Materials margin. I think it's pretty obvious also in Ireland where the margin impact will have come through in terms of that shutdown that we saw in the Q1. I think as you look out across the next 12, 18 months, clearly, the market backdrop would appear to be pretty positive. And therefore, that would lead us to conclude that we should be able to at least recover our input costs as they come into the business and hopefully a little bit do a little bit better than that. I think the only caveat I would add to that, particularly around GB Materials, is that the CEMEX assets at the moment do deliver a margin that is some way behind the core divisional margin. That will continue certainly over the course, I would say, of the next 12 months. Clearly, as we start to deliver synergies, we will see improvements coming through from those. And over time, the intention is very much to get those assets back to the kind of levels of profitability that they were delivering some 3 or 4 years ago. But that will take a bit of time and will take a bit of effort. We're really pleased with how the operational integration, if you like, has gone to date and the assets are well positioned, but it will take a bit of time for those to feed through into the underlying numbers. So I pick up the second part of your question in terms of those the organic growth opportunities, Christian. I mean, if we look at the couple of examples I've mentioned today, we look at SHAP to begin with. This was a quarry that was closed when we acquired it. And interestingly, part of your question was about CapEx as well. This was a quarry that was replanted in terms of its crushing equipment only back in about 2018. So really, I mean, this was a business that wasn't contributing to the earnings when we acquired it and we genuinely believe will contribute to the earnings going forward. The fact that it's got access to rail is an advantage, particularly as things tighten as we believe they will in the Midlands in the coming years. The other one in Longford, we've always been very open about our ambitions to expand our aggregates business in the south of Ireland and I would expect further dormant assets and to be opened in the coming months. And in terms of the CapEx, Kristen, I mean clearly the super deduction is very attractive to lots of businesses across lots of sectors. It essentially self finances over the course of the next couple of years. So that's one reason for looking to up the capital investment. As we touched on, I think at the year end, we've seen particularly within CEMEX, there are some real opportunities for some quite targeted capital investment that we see can produce some very quick paybacks and returns. And as always, with any CapEx project, we'll look at them through the lens of the returns that it can give the group. And we see a number of opportunities to produce good returns from targeted investment back into the business. Excellent. Thanks very much. We'll now take our next question from John Fraser Andrews from HSBC. Please go ahead. Thank you. I'll have 3 as well please. The first one is a sort of bigger issue question about the timing of the dividend payments now. Does that indicate that the national footprint is now in place and that the pace of acquisition from here on is probably going to be slower clearly in the last 5 years, 3 very major acquisitions. Do you feel now that you've got the pieces of the jigsaw in place where you can have this new balance towards paying back some money to shareholders and possibly a more measured pace of inorganic expansion from here. So that's the first question. The second, a follow-up, James, on the super deduction. I think I heard you right that it will be self financing in the next couple of years. Are you therefore flagging 30,000,000 of return and at what level is that pretax? Perhaps you could elaborate on that. And then finally, just on the in the Cement division, very strong half one outturn. Did you benefit from the squeeze on supply that some producers were experiencing? And so did you have a super normal half one in that division? And what prospects have you got for future growth in it given where your capacity might sit? Thank you. Okay, John. So taking the first one surrounding dividends, the first dividend that we've declared today has been pretty well trailed. The Board and the group have been talking about starting to pay a dividend for a few years now. And I think it's another important landmark on the group's path to maturity. We feel that the group is now of a size. The cash generative nature of the group means that we do produce a lot of cash. And therefore, it is the right time to start paying a dividend. It will broaden the range of institutional investors who can invest in Breton shares as well as providing an income stream for our retail following. But I think the important thing to stress is that the capital allocation policy remains unchanged. And we certainly don't see this as either a signal or a fact that we will be reducing the pace at which we try to go grow Breton. We still see that there are opportunities for acquisitions and potentially some quite material acquisitions within our current footprint. And we're starting to explore potential opportunities to broaden the group's footprint and ambitions elsewhere. So I certainly don't believe that the pace of growth, the pace of opportunity within Breden is going to slow as a function of us starting to pay a modest but progressive dividend. In terms of the capital super deduction, the benefit of the super deduction is clearly that we can get a tax deduction in excess of the initial capital cost in the short term. So that should therefore mean that it effectively becomes self financing. I don't think that necessarily means that you're going to see €30,000,000 of incremental EBIT dropping through in the course of the next 2 years. But what it does mean is that we've been able to accelerate some of those capital investment plans that we would undoubtedly have got to over the course of the next 3 to 5 years and have been able to bring those forward. I think the only caveat I would add to that is clearly everyone's out there looking to take advantage of the super deduction. So the only thing that may preclude us from making those investments is whether or not we can take delivery of the capital equipment that we would like to over the course of that time horizon to April 2023. If I pick up in terms of the cement and the H1, I mean, we did have a strong H1. There was very strong demand both in GB and Ireland for cement. The first half was also impacted by, I mean, ourselves, but also a number of the other players in the market having their preventative maintenance shutdowns. And I think that has brought some challenges which I think for us as I said when I spoke before should be behind us in the second half of the year. But we don't see demand levels for cement changing, particularly in the second half that we see them remaining strong. However, we aren't able to talk, particularly in GB in the U. K. About capacities. Understood. Was there a notable pickup in your imported volumes through the terminals, Rob? We continue to import through the terminals. And but I think what we're seeing in the U. K. And what we're seeing in Ireland is probably to an extent being replicated in some of the markets that we import from as well as markets recover. And just a final follow-up, The cement margin actually rose exclusively across the divisions. Does that indicate that it was quicker in terms of recovering input cost inflation than the other product lines? John, I think it's more to do with the volumes that we've seen coming through the business. Clearly, it's got it's a relatively high fixed cost base. And therefore, if you're delivering incremental volumes across that fixed cost base, you get the benefit of operational gearing. So we did see pricing across the Cement division as a whole in the first half, but it was relatively small. Very good. Thanks very much. We'll now take our next question from Clyde Lewis at Peel Hunt. Please go ahead. Good morning, guys. I think I've got a few as well, if I may. Probably one for you, James, to start with. Just around the U. S. Private placement, just in terms of, I suppose, your thoughts about the scale that you've taken there and just sort of understanding, will you be drawing all of that down over the next, I suppose, 6 to 12 months? And I suppose on the RCF, just if you can help us a little bit as to around the changing rates that you flagged there. I think you've indicated it's initially at 2, but how does that move going forward? The second one I had was on the acquisition pipeline. Rob, you flagged that that's looking quite good. Can you give us a little help as to, I suppose, the sorts of businesses now you're looking at both by product and I suppose geography as well, it would be helpful just to sort of understand that, but also to understand the sellers' attitudes as well and how that's evolved over the last 6 to 12 months. 1 on carbon costs. And I suppose, James, you flagged, I think you've got this year covered. What are you going to do going forward? Are you going to try and get at least a sort of rolling 12 months cover as you sort of try and plan things under the new U. K. System? Or is that still evolving too much? And the last one was on the ready mix volume. I suppose just trying to understand why ready mix volumes were a little bit softer or not as good as some other products in the first half of the year? The number of questions seems to be compounding from each of the analysts. By the time we get to the bottom of the list, we'll be up to about 20, I suspect. So, Clyde, yes, in terms of the U. S. Private placement, yes, the intention would be to draw that down during the course of the second half. We were really pleased with the reception that we got in that market, particularly being able to secure financing going out 15 years. And the fact that the initial offering was more than 10 times oversubscribed. So that was clearly very positive. In terms of the RCF, at the out of the box rate of around 2%, as is customary within RCF, obviously, the private placement is fixed rate debt. The RCF, there's a margin grid. But and therefore, we would expect to see a little bit of downward pressure, if anything, in terms of that interest rate as we continue to delever. At some point, that leverage profile may well go up again in the context of an acquisition and then that in turn would potentially lead to the interest rate going back up again. In terms of the acquisition pipeline, Clyde, I mean, yes, it is encouraging. And we would be disappointed if we weren't able to close additional bolt ons before we do the prelims for 2021. We in terms of the sorts, predominantly bolt ons, nothing new, could well be in GB, could well be in Ireland, are likely to be around aggregates, asphalt, maybe even in the contracting space really, which is our paving business that we're growing. So but it's really sort of more of the same and more of what you're used to at Braden. Turning to carbon allowances. Our thoughts around hedging for carbon are pretty consistent with how we look at all of our energy input costs, which is that we will aim to progressively hedge and to have at least 12 months future coverage. So I think the encouraging thing about the new U. K. Trading market is, 1, that it launched on time because there was some uncertainty as to whether that would happen. 2, the liquidity was slightly better than I think people had expected. And 3, that the pricing into the market remains sort of within what I would term a reasonable range of market expectations rather than where some of the forward curves we're looking at sort of back in April early May. So certainly, the intention would be to try and layer out into 2022 and potentially beyond in time. In terms of the ready mix volumes, and I think again, it's important to stress ready mix still grew and we still saw some nice volume recovery there, but it was slightly behind the other product lines of the business. The 2 key end markets for ready mix for us are newbuild and clearly that's been relatively strong. But the other key market tends to be commercial. And what we've really noticed over the course of the last 12 months is that the number of big tower blocks being constructed in city centers, there aren't too many of those projects going on at the moment. So that's that we feel is one of the factors behind that slightly lower growth in ready mix volumes. Perfect. Thank you, gents. We'll take our next question from David O'Brien at Goodbody. David, please go ahead. David? Sorry, can you hear me? Yes. Just 45 questions for me. Look, just 3 for me. Firstly, generally on the bidding environment and more through the lens of sustainability, I guess how is that impacting the bidding process at the moment? And are we still in a situation where it's purely on price that contracts have been won? Or is there a sustainability criteria really coming in there? And secondly, and I might be nitpicking a little bit, but your guidance points to a little bit of a step back in profitability in the second half. It doesn't look like there's too many clouds in the horizon given what we've discussed this morning. Is it just caution given it was such a busy H220 or is there more to it? And then finally, if you could just give us a little bit more color on the rollout of contracting and why that would be important to the GB businesses and the virtues of maybe some further integration there? Thank you. So in terms of sustainability, David, I mean, it's a topic that we will discuss in much more detail with you in the autumn. But it isn't all just about pricing now. I can without talking on specifics, but we bid and we have bid for projects and we know there are main contractors out there bidding for contracts where price is only one element of the award criteria. And we are seeing bids and awards where quality and sustainability are the majority and prices becoming a minority element of the award criteria. But we will come and talk about that in more detail, but it is things are changing. In terms of the second half guidance, I mean, I think that site depends if your glass is half empty or half full. We have come forward with a significant And particularly, if you look downstream through the supply chain, there are well documented challenges about ability of people to access labor, about supply of raw materials into the merchants and ultimately onto the building sites. And therefore, there could easily be a scenario where we see some challenges to meeting the potential demand across the second half of the year. I think the second factor is that the second half of last year, the activity was undoubtedly underpinned by the deferred activity levels from the first half of twenty twenty. It's difficult to quantify exactly how much that was. But as an example, in the Irish business, the Irish delivered effectively the full year budget in the second half of the year. And a good deal of that was down to the fact that the activity that they would ordinarily have done in the first half could only take place in the second half. So I would say that we are optimistic as we sit here today. We've had a very good and very strong first half performance for the year. We do feel confident that the upturn for the full year will be ahead of where the market was expecting coming into these results. But there remains a degree of uncertainty about the second half and about what may happen over the remainder of the year. In terms of contracting, David, we have a pedigree in contracting paving and we're strong in Scotland. We are strong in Ireland, particularly in the South. We but with England, we were much more of a regional player. And as we said with the acquisition of the CEMEX assets, we then accelerated the build out of our asphalt footprint and it gave us the opportunity to then participate more comprehensively in the English markets. We did bring on James Hallock to look at the contracting strategy for GB and we will look to build that out. We're not just looking at capturing a paving margin. We're looking at the breed and model and we're looking at routes to markets. And so we look to be able to pull through aggregates and we look to be able to pull through aggregates into that business and grow it in the years to come. That's brilliant. Cheers. Thanks guys. We'll now take our next question from Anastasia Solonitsyna from UBS. Please go ahead. Hello. Thank you for taking my questions, if you please. In terms of the guidance, if you could shed some color, what revenues do you imply in your new guidance? And you previously flagged your ambition to restore margins to historic levels. And how quickly you think you could get to 2019 level of 12.5 percent? And what would be the path to return margins excluding contracting mix effect? And also if you could give us some color on divisional margin aspirations from here in the midterm? And a second question on a follow-up on contracting business. So basically, your JB revenues in contract more than doubled in the first half of the year. Do you think to sustain the momentum in the second half before your revenues above 100,000,000 dollars And how quickly you think to grow from there? And would you also disclose its contracting contribution on EBIT level at some point? And the third question is on M and A. Basically, what countries would you consider to go into if you would buy some businesses outside of Great Britain and Ireland? And 4th question, a small one, just what is the CO2 deficit in tonnes for you? Thank you. Sorry, can you just repeat that 4th question again, Antony? Anastasia? Sure. To deficit in tonnes in terms of the yes. Yeah. So what was that? CO2 deficit. CO2. Do you want to pick up on the margins? Yes. So in terms of the margins, Anastasia, clearly, the group has seen a significant recovery in margins over 2020. We haven't quite got back to the 2019 levels in the first half. And that's really a function of that lag in pricing come the end of the year. So certainly, that margin gap, if you like, we would expect to close some more over the course of the second half. And that's really a function of the timing of price rises through the first half of this year. Looking a bit further ahead, clearly the CEMEX business does act as a drag on the GB Materials margin in the near term. We have completed that the operational elements of the integration. And it's now really a question of really trying to sweat those assets and to get the returns up to the kind of levels that we think they can get to. Everything we've seen about those assets, everything that we've seen about the people that have joined us from those assets means that we've got no fundamental worries about our ability to drive those returns over time. And it just will take a bit of time for that to feed through and drop through to the bottom line. In terms of divisional margin performance and expectations, I mean, with GB, I've just talked about what we might expect to see there. I think with the Irish business, it is more project in nature. So you get less of that operational gearing impact. So I suspect there's less margin potential to go for within that within the Irish business. And clearly, the cement business as a fixed cost business, as we get increased pull through of volumes over that fixed cost base, we'll see the drop through on that. And the demand backdrop for cement is very well documented. The U. K. Has always been structurally short of cement. In the current market environment, it's even more structurally short of cement. And therefore, the implications for margins there as we see that demand pull through are pretty positive. In terms of the contracting revenues for the first half, I mean, the two things I would point out to you are, 1, we've been busy on the A9 project up in Scotland for Balfour Beatty and that will be coming to an end in the next few weeks. We've also been busy on the Dunkeletal interchange in the south of Ireland. So I think we will continue to be busy and we do think that some of these mark some of these projects will come off and other projects will come on. But that underpins the particularly strong first half. We don't anticipate separating out contracting margins. As I said just before, it's about being a route to market and it's about capturing the aggregate margin, the asphalt margin and the paving margin. So it will remain part of our core GB business. And in terms of our aspirations for that business, we meaningfully want to grow that business. But today isn't the day to put any more color on that. It would be much better to maybe update you on our aspirations there, but also more of a refresh and of our strategy in terms of sort of evolution not revolution and even considering a potential third platform at the Capital Markets event we have in the autumn. And in terms of the carbon deficit, so we've historically tended to require the acquisition of about 350 1,000 tonnes of carbon allowances. That will be slightly lower actually this year and next. And that's a function, one of the continuing improvements that we're managing to make most significantly at Kinnega, but to a slightly lesser extent, I hope, in terms of using alternative fuels and the benefits that we derive from that and then a combination of slightly higher free allowance that we've got for the 'twenty one and 'twenty two calendar years. Thank you. And just a follow-up, what does the new EBIT guidance imply for revenues this year for revenue guidance? For what, sorry, for the product? For revenue guidance. Sorry. So we think that revenues for this year will come out at about £1,200,000,000 sorry. Okay. Thank you. Where's it gone? Thank you, Anastasia. As a reminder, if anybody would like to ask a question, if you could indicate that by raising your hand. And at this stage, we have no further questions. So Rob, I'll just turn it back to you for any closing remarks. Well, look, thank you. Look, we are really pleased with the first half. We are optimistic about the future and we look forward to updating yourselves and the investors at the Capital Markets event, which will be focused on sustainability, but it will be an obvious time to just give you a refresh on the strategy for the group. And so we look forward to setting a date and meeting you then. And thank you very much, everyone.