Good morning all, welcome to Galliford Try Holdings' Half Year Results Presentation for the six months ending December 2022. I'm Bill Hocking, Chief Exec, and I'm here with Andrew Duxbury, Group Finance Director. The photos you see here is 280 Bishopsgate, which is a GBP 50 million-plus private sector refurbishment contract. It's an excellent example of our retrofit capability and has achieved a BREEAM outstanding rating for both refurbishment and fit-out. Here's the agenda for today. With the recently completed phase I of our A47 program of road improvements as a backdrop. I'll start with the headlines, Andrew will take us through the numbers, and then I'll give a progress update on our sustainable growth strategy. Onto the headlines. We're really pleased with our performance in the half year with disciplined growth in revenue and operating margin.
Thanks to our people, our businesses are performing well. Our acquisitions are settling in and allow us to offer a broader range of capability to our clients. Despite the delays in converting preferred bidder positions from last year, we have increased our half-year PBT to GBP 11.7 million with an operating margin of 2.3%. Our balance sheet remains strong. We're really pleased to declare an interim dividend of 3p, up from 2.2p in the same period last year. Looking forward, the order book is robust, aligned to our risk appetite. We continue to see a strong pipeline of future opportunities across our market sectors. We're confident in achieving our FY 2023 targets and continuing to improve our performance to deliver our FY 2026 sustainable growth ambitions.
Those are the headlines, and over to Andrew for more detail on the financials.
Thank you, Bill. Morning, everyone. The picture on the screen is from Utility Week Live, a great opportunity for us to showcase our capabilities in water. Before I get into the detail, let me remind you of our investment proposition. Galliford Try is a high-quality business driven by a progressive culture with leading positions in robust market sectors and generating increasing returns for our shareholders. The opportunities in our market sectors remain strong with good levels of government investment. The risk profile of our portfolio of projects is very good, and we have excellent forward visibility, as Bill will cover later. Importantly, we have the culture embedded across our business to deliver our strategy with everyone aligned to our purpose, values, and approach. Our financial position is very strong, and we are demonstrating a track record of delivering consistent, predictable financial results.
We have a clear strategy which will further increase shareholder returns. As Bill said, we're very pleased with the performance in the H1 year and the progress that we are continuing to make against our financial targets. The financial headlines are on the slide, and you can see that all these key performance metrics show improvement compared to the same period last year. In particular, revenue is up 14%. Our divisional operating margin has increased to 2.3%. Pre-exceptional profit before tax is up 65% and is actually higher than the full 12 months to 30th of June 2021. I'll come into some more detail on all of these in a moment. This all translates into increased shareholder returns with the interim dividend 36% higher than last year.
Putting this together, we are confident in the outlook for the remainder of this financial year and have increased our guidance for full year profit before tax towards the upper end of the range of analyst estimates. Going into the results in more detail. As I said on the previous slide, revenue is up 14% in the period. Buildings revenue is up 3.5%, and this is despite seeing some contract starts delayed through 2022 as a result of inflation and then slower public sector decision making. We discussed this in September, and Bill will touch on it again later, although we are pleased to see these issues are beginning to ease. Importantly, we retained our disciplined approach to tendering and our focus on quality and margin.
Infrastructure's revenue is up 35%, and this is driven by our environment business, the continued improvement in AMP7 revenues, and of course, it includes the full six-month benefit of the acquired nmcn business, which didn't contribute much in the equivalent period last year. More importantly, both building and infrastructure showed margin progression compared to this time last year with operating margin in both divisions up to 2.3%. Pre-exceptional operating profit before amortization is up 57% at GBP 10.8 million. This includes GBP 3.6 million on the sale of our interest in a joint venture business. This has no impact on the improved divisional margins as it's reported through our investments business, but of course, it does benefit EPS this year.
The disposal was a one-off sale of a non-core investment, not part of our PFI portfolio and doesn't change our overall strategy on PFI. Central costs of six and a half million are a little bit higher than this time last year due to some increased share-based payment costs and also some half-year timing differences. Interest income was up by 1 million pounds, reflecting improved returns on our cash position. We've reported exceptional costs of four and a half million pounds. These are entirely related to our investment in our cloud-based IT systems, as described last year and which is still progressing to plan. The pre-exceptional tax rate at the half year of 19.5% is just below the standard rate.
The rate was much lower last year due to recognition of brought forward losses, but is now beginning to normalize towards the standard rate as we indicated last September that it would do. Altogether, this means that EPS has increased by 49% compared to last year. The quality of our order book and contract portfolio continues to be a key driver of our margin improvement. Operating profit pre-amortization has increased to GBP 10.8 million, and you can see the underlying business improvement behind this, with 30% of that increase directly from margin improvements. That's despite the fact that there is GBP 600,000 of net costs included in that margin from the two acquired businesses in the half year, MCS and Ham Baker. These are good investments, but have slightly dragged the margin in the half year.
Without these, the GBP 1.2 million margin increase in the middle of the slide would have been GBP 1.8 million. In a steady state, these acquisitions will deliver higher margin revenue. Our strong balance sheet, both our cash and our PPP assets, continues to help us in the market in winning work and in engaging with the supply chain. It's worth repeating that we have no pension liabilities and no debt. Our intangible assets and goodwill increased as a result of the acquisitions in the period of MCS and Ham Baker. Our PPP assets are valued at GBP 46 million, which is at a blended 7.1% discount rate.
This is a slightly higher discount rate than last year. We have seen U.K. gilt rates increase. These assets are very defensive and with a low risk profile, the valuation is relatively insensitive. The portfolio contributed GBP 2 million of interest income in the half year, similar to last half year. Month-end average cash was GBP 154 million, with period-end cash at GBP 196 million. This is lower than last year, still very strong. The movement is summarized on the cash bridge. We invested GBP 4.5 million of cash in our IT upgrade, which you can see as exceptional items towards the right-hand side of the slide. We returned GBP 10 million in dividends and through the start of our share buyback program.
Operating cash flow was impacted by some delayed contract starts, as I referred to earlier. The delayed contract starts, as well as the funding of the acquisitions, including the unwind of acquired liabilities, has resulted in a small operating cash outflow in the period. These features will remain in the H2 year, so we expect average month-end cash in the full year to be similar to the H1 year. Importantly, our daily cash performance is robust and resilient, and we continue to pay the supply chain well in 26 days on average. We paid 98% of invoices within 60 days, and for our small company suppliers, we paid close to 90% of invoices within 30 days, which is very, very good in the sector. We continue to prioritize and retain a strong balance sheet.
Our balance sheet provides a competitive advantage, which helps to deliver our sustainable growth plans. It is valuable to our clients who see the importance of financial stability of their contractor and to ensure we're a partner of choice for our supply chain. On top of that, it allows us to invest in our people, in quality, in digital assets, and importantly, in adjacent markets, including, when appropriate, acquisitions. Each of our adjacent markets has the opportunity to grow organically, and while we aren't reliant on bolt-ons, we're also stay alert to opportunities that arise. Our strong balance sheet also provides mitigation against future adverse market conditions and gives us the confidence that we can pay a growing and sustainable dividend.
Putting together the excellent performance, strong balance sheet, the confident outlook, we've today declared an interim dividend of GBP 0.03 , which is 36% up on this time last year. Of course, as we deliver our strategy with revenue growth and margin growth combining, our dividends will continue to increase accordingly. With that, I'll hand back to Bill.
Thanks, Andrew. Onto an update on progress on our sustainable growth strategy. This is a photo of Ascot Sewage Treatment Works, which is a refurbishment and upgrade of an existing facility and a good example of the type of work we do in the capital maintenance part of the business. The U.K.'s planned investment in economic and social infrastructure remains resilient and underpins our growth in core and adjacent markets. We have strong positions in these markets, which I'll come onto in a minute. Our ability to support clients' objectives to reduce operational and embedded carbon remains a work winning differentiator, and the green retrofit market continues to gain momentum. We see inflation subsiding along with the subsequent delays in converting preferred bidder positions, and the availability of materials is generally no longer an issue.
This slide is to demonstrate that we're grounded in reality and shows what we've been doing to manage the challenges in the economy over the last year. As I said, whilst inflationary pressures are subsiding, we maintain our attitude to risk by pricing in our view of inflation across the life cycle of each project or by ensuring contractual protections are in place. In addition to our collaborative relationships with our supply chain, to mitigate the risk of supply chain failure, we've implemented an enhanced due diligence regime for key subcontractors, and of course, we pay them promptly, as you saw in Andrew's slides. Materials availability is generally no longer an issue, but notwithstanding that, we have maintained some of the early planning and procurement disciplines to mitigate risk. Retaining our excellent people and attracting new good people to the business is core to achieving our growth plans.
We invest heavily in developing our existing staff and are pleased with our progress in attracting new high caliber people to Galliford Try. We have a low voluntary churn rate and an early careers population of 6.3%. We were one of the first contractors to pay a cost of living payment, which we pay to about half of our staff and are early adopters of the new rate of the real living wage. We continue to remain very selective about the projects we undertake, and this leads to a high quality order book which has allowed us to, despite the challenges, maintain and improve our margins. Here's a reminder of our sustainable growth strategy. We have a simple aspiration to deliver high quality products to our clients in a socially responsible manner and provide a good return to our shareholders. There are four cornerstones of the strategy.
First and foremost is our people and the drive to be a values-driven, inclusive, progressive business where the safety of our people is paramount. We focus on retaining and developing our people and attracting new high caliber staff to Galliford Try. We go about our business in a socially and environmentally responsible manner, striving to achieve our net zero targets for 2030 and 2045, and contributing to the local economy around our projects by employing local people and by procuring goods and services through local companies as far as possible. We deliver high quality products to our clients and embrace modern methods of construction, offsite build and digitalization to improve quality and efficiency.
A high proportion of work is delivered through our supply chain, and so our Advantage through Alignment program of collaboration and our Net Zero Partners initiatives are important, as of course is paying them promptly on average in 26 days, as you saw earlier. All this comes together to provide good returns to our shareholders. Our strategy targets disciplined growth in our existing markets, which you see on the left, and in three higher margin adjacent markets on the right: the private rental sector, the green retrofit of existing buildings and asset maintenance or asset optimization in the water sector. Our targets for 2026 are revenue of around GBP 1.6 billion at 3% operating margin, and we're making good progress towards these goals. In our existing markets, all three businesses have excellent long-term frame of positions, strong order books and are performing well.
In our adjacent markets, we have seen a hiatus in the PRS market post the mini budget of last year. Sentiment seems to be improving of late. Momentum is growing in the green retrofit market and our capital maintenance asset optimization operations in the water sector are gathering pace with the award of a number of long-term frameworks for existing water clients. Our growth is underpinned by our sustainability commitments. You can see some recognition of this along the bottom of the slide. From the Clear Assured organization for our approach to inclusivity, from The Job Crowd for our early careers programs, our input into the U.K.'s net zero carbon standards and contract of the year from the water industry. This external recognition helps Galliford Try to be an attractive destination for good people.
It supports our clients' objectives, it's great for the industry and accentuates our ESG credentials. We will of course have a more fulsome ESG report at the full year. Here's some more detail on one of our adjacent markets, capital maintenance and asset optimization in the re-regulated water industry. We work for every major water company in the U.K. We expect this to continue in a similar format through AMP8, which is through to 2030. We've been investing in this sector organically and through acquisition and are now one of the biggest players in the sector. The combination of Lintott, MCS and Ham Baker gives us excellent off-site manufacturing capability. The bar chart in the bottom right of the slide shows that the majority of our work at present is in the design, building and commissioning of water and wastewater treatment works.
Our acquisitions have broadened our capability in offsite design and manufacture of controlled equipment and chemical dosing equipment. This gives us the opportunity to capitalize on our geographical presence to offer our clients an end-to-end service through construction and into the long-term maintenance and optimization of their assets. You can see from the second bar that the mix of work in our water portfolio is expected to change material over time with the higher tech, higher margin work constituting a greater proportion of what we do. You've seen this slide before. I've included it again to demonstrate that our approach to risk remains unchanged and core to our culture. We have robust risk processes at bid stage, strong project controls through the tenancy of our projects, and an embedded culture of risk awareness where we only accept those risks that we can sensibly price and manage.
This is another key slide which reiterates how quality, significantly more so than cost, is the basis of how we win work. The quality price split in a public regulated sector bid is typically 70/30 or 80/20, as you see in this example. You can see that non-financial metrics constitutes the majority of the marks available. The financial criteria will include things like balance sheet strength, prompt payment performance, the ability to get bonds and insurance and so on, as well as overheads and profit. As it happens, I reviewed a bid just last week where social value constituted 15% of the quality marks. Social value is investing in the local community through employment training and using a local supply chain as much as possible. This example demonstrates the importance public sector clients are putting on this measure.
This more mature method of client procurement is now the norm in the public and regulated sectors, increasingly so in the private sector, and underpins a more sustainable construction industry. We have a robust order book at GBP 3.5 billion, up GBP 100 million in the same period last year. You can see the details of the order book in building and infrastructure on the left-hand side. The split between the public and regulated sectors and the private sector remains steady at about 90/10. This typically varies between about 90/10 and 80/20 with the AMP cycles in the water industry having the most influence. The order book continues to have all the attributes that we need to underpin our goals in terms of its quantum, its longevity through frameworks, its sensible risk profile and of course, a high proportion of repeat clients.
It's good to see the incidence of delayed project starts reducing and we expect this to continue. At the half year, we have the vast majority of this financial year's work secured and already have 79% work in hand for the next financial year, which is an excellent position.
We focus on public and regulated sector frameworks as a means to secure long-term, high-quality work. The different frameworks will have slightly different attributes, but all of them provide sensible terms and conditions aligned to our risk appetite, the ability to form long-term collaborative relationships with our clients and reduce our tendering costs. They give us long-term visibility of the pipeline and better, more consistent outcomes. This slide demonstrates that. It's a good visual example of the forward visibility of the work that we get through our excellent framework positions across all of our sectors. You can see a solid pipeline of work out to 2026, and this underpins our culture of risk management and selective bidding. In summary, we remain in very good shape.
Thanks to our great people, we are doing what we said we would do, consistently delivering both growth and better margins, supported by a strong balance sheet, excellent order book, and good supply chain and client relationships. Our key KPIs are up on last year, and we're very pleased to deliver an increased interim dividend on the same period last year. We remain confident in the outlook for the full year and beyond towards our 2026 targets. That concludes the presentation. Thank you for listening, and I'll hand back to the operator to take any questions. Thank you.
Sure. Ladies and gentlemen, if you'd like to ask an audio question, please press star one on your telephone keypad. Please ensure your mute function is not activated to allow your statement through to your equipment. Once again, ladies and gentlemen, please press star one to ask a question. This first question is coming from Mr. Andrew Nussey, calling from Peel Hunt. Please go ahead, sir. Your line is open.
Good morning, Bill and Andrew. Couple of questions from me, please. First of all, Bill, you referenced a strong pipeline of opportunity. Are there any areas of particular interest within that? Obviously aligned to that noted sort of AMP8 awards starting to come through. Within that, is there any suggestion within that AMP8 will have less of the ramp up, ramp down of activity that we've seen historically? Is the first question.
Okay. Morning, Andrew. you know, the pipeline remains strong across the board. I think that AMP8, you know, we've campaigned for decades to have the amplitude of the cycles between the AMP cycles, sort of flatten a bit. I do think that this time round, we will see a flatter, sort of interaction between AMP7 and AMP8. AMP8 looks like it's gonna be a bigger program than AMP7 by some margin. You know, we've all seen in the press about CSOs and so on in the water industry. I think that our acquisitions in particular are gonna help us address this market through AMP8 and beyond. I think AMP8 will be good for us personally.
Looking further forward, of course, we've got RIS3 in the highways market coming through and then an undiminished pipeline in the public building sector across health and defense and education and so on. We see no diminishment at all in the pipeline across the board, Andrew.
Okay. Sort of second question, again, sort of tied to environment. Obviously, as you highlighted in the deck, that you're now working with all the water companies. Are there any economies of scale or any sort of opportunities for best practice sharing by virtue of the fact you're now bringing in the maintenance angle as well as sort of design and build?
Yes, there are. I think the one thing that we see from our geographical presence and the fact that we work for all of these companies, Andrew, is that we see the different standards. Different water companies have different engineering standards, and what we're trying to do is try to get them to harmonize them a bit further, which allows us to then produce exactly the economies of scale that you talk about. For example, for Thames Water, we deliver in a program of phosphate dosing plants. These are plants that are built in our factories and are delivered to sites over the whole of the AMP7 and probably into AMP8 period. They're slightly different for the phosphate dosing plants we built for Severn Trent and for Anglian Water and so on.
If we can get the water companies to harmonize a little bit on what they do and have a more common platform anyway, I don't think it'll ever be to a totally common platform, but a more common platform, that gives us the opportunity to do exactly that, share best practice and provide economy of scale.
Okay. That's great. Thank you very much.
No, thank you very much, sir. We'll now go to Mr. John Fraser-Andrews calling from HSBC. Please go ahead, sir.
yes. Good morning, Bill and Andrew. I'll have a couple, please. The first one is on inflation. The statement...
Mr. Fraser, could you please check your line, sir? Your line is breaking, sir.
It ca-
Mr. Fraser-Andrews, your line is really breaking, sir. Could you just maybe, just check it quickly now? We'll give you one more chance, please, sir.
Can you hear me?
We can now, sir. Thank you.
Great. On inflation, how are you managing this and are you seeing this leading to any delays or cancellations in contracts? Doesn't seem to be an issue in the order book, but sort of how significant is this issue in the industry?
Well, inflation is definitely settling down, John. I think what we need to be careful of is misinterpreting inflation settling down and costs going down, because I would say what we see is costs plateauing and becoming far more stable and predictable, with inflation slowing down. So, it is the whole, I think the whole environment on site is much more predictable and stable, both in terms of inflation, in terms of materials availability, in terms of people or trades availability anyway. So, yeah, I think the overview is that it's much more stable altogether.
Bill, is this deceleration, in inflation, is this perhaps providing a margin opportunity for you, given that, you may have, budgeted for higher costs than you might see on some of these items?
Well, I think two things, John. It's probably a bit early to say that just yet. I think the other thing which is worth mentioning is that what we've seen in this inflationary spike is a high degree of pragmatism from most of our clients, not all of them, but most of them, where they've allowed us outside of the contract to put in mechanisms to protect us against inflation. The quid pro quo of course of that is that as inflation comes down and settles, you know, we might have to give a little bit of it back. The point is that we've been protected on the way up, and I think that'll sort of be buffered on the way down by the opposite.
Overall, I think that, you know, typically what we'd see in an inflation cycle is margins improving as inflation goes down. I think we will see some of that in the fullness of time. As I say, that will be moderated to quite an extent by the pragmatism we've seen from our clients and the quid pro quo.
Thank you.
Sorry, John, you're breaking up again.
The final question, Bill, was on the housing development that you're doing. You mentioned the hiatus. Can you talk about that market? Is it kicking off again in terms of, you know, demand for rental property? Are you seeing a pipeline in that area?
Yeah. Look, I think the long-term pipeline for PRS is incredibly strong. The hiatus following the mini budget last year was just the PRS companies just pausing for breath and having a look at the interaction of construction price increases and inflation and rental yields and things like that. They're just waiting to see it all settled down before it goes again. We've, we've no doubt that that market remains robust in the long term. Our first development is it was affected by this delay, but hopefully we'll be on the ground, or signed up anyway in the next probably half of this year, I guess.
Are your margin aspirations in this, Bill, affected at all by market conditions?
No. Obviously there's a bit of recalibration needed, John, but, overall, we still expect to make typically double our construction margins through the, through the combination of the front-end development gains and the standard construction margins.
Thanks, Bill.
Thank you.
Thank you much, sir. Ladies and gentlemen, once again, if you have any questions, please press star one. This next question is coming from Mr. Alastair Stewart, calling from Progressive Equity Research. Please go ahead.
Hi, Bill. Hi, Andrew. I have three questions with me. One's fairly straightforward. The PPP directors valuation came down from GBP 48.3 million to GBP 46.1 million. That you mentioned in the RNS, the discount rate expanding from 7% to 7.1%. Was the decline in the valuation purely an effect of that change in discount rate, or were there other moving parts? That's question one. Question two, you suggested, Andrew, that the working capital position would be similar in H2, and you'd have similar, you know, average net debt in H2, sorry, net cash, sorry, in H2.
As things normalize, looking into FY 2024, do you see the average net cash increasing? What's gonna drive that if that's the case? Finally, you've said for quite rightly for some time that your strong balance sheet is a differentiator, and you win certainly a proportion of work on the basis of that. Previously, it seemed to be a subjective comment. Have you got any numbers to back that up, the % of contracts awarded? Is that based on balance sheet strength? Earlier, you mentioned the social, the ESG side, I think it was 15% weighting in contract decisions.
Anything, objective, to back up that view?
Okay. Morning, Alastair.
Morning.
Let me pick those up.
Andrew.
On the PPP valuation change, so, there's a little bit of redemptions in there, and then it was also on the change in discount rate, and it's probably the change in value is probably kind of half and half between those two, those two things, Alastair.
Mm-hmm. Yep. Yep.
Obviously, you know, we looked at the discount rate.
Yeah, these are, as I said in the presentation, you know, very low risk assets, so relatively.
Yeah
relatively small impact.
Sorry, just on that point. That was the average, the blended average discount rate, 7.1, during the half-year. Is that likely to rise any further in H2 and going into next year because, you know, certainly the spot rate is higher year-on-year as it were?
Well, we look at it at each reporting period end, Alastair.
Yeah
... the facts and circumstances at the time.
Yeah
We will, yeah, obviously keep that under review, but those are good quality assets. Very happy with the valuation of those.
Yeah. Yeah.
In terms of the second question, in terms of I'm glad you corrected it to the net cash on the balance sheet. You're right, we've got to a similar position for the full year. I think as we go forward, yeah, we expect to be, you know, cash generative at the operating cash level. Certainly as, you know, as the business grows, I think we'll see that coming through and certainly some of the impacts, you know, through FY 2024. For example, in terms of our spend on, you know, the IT investment that we've got and some of the unwind of the liabilities in the acquired businesses, those will become less of an impact in FY 2024 than they are in FY 2023.
I think that should benefit the position as we go forwards. In terms of your third question on balance sheet differentiation. I suppose there's two things I'd say. The first is you can see on the scoring mechanism that Bill referred to in the presentation, you know, that we do get scores and we do get marks in our tenders for the strength of our balance sheet. That clearly helps us in terms of getting better scores. You can see that's the way the mechanism works in some of the tenders. There are, I mean, there's specific sites and projects that I could point to where we've been invited to negotiate for the work, often a one-on-one negotiation.
Part of the reason that we've been invited is because of our balance sheet strength. I can't give you a sort of precise number of exactly how many of our contracts we've won because of our balance sheet strength, but I can tell you that, as I say, that's in those scoring mechanisms. It's, you know, it's always helpful, and there are specific examples where we've been brought in because of that strength directly. Yeah. It is real. It is real and tangible.
Yeah. No, no, I'm assured it was. I just wondered if there is anything tangible you could point to because you mentioned, you know, the scoring mechanism with ESG. No, it certainly sounds like it's a real benefit.
Yeah. Yeah, absolutely.
Great. That was it.
Okay.
Thanks very much indeed.
Thank you.
Thank you, Mr. Stewart. Next question today will be coming from Mr. Alex O'Hanlon from Liberum. Please go ahead.
Morning, Bill and Andrew. Just one question from me. You and other contractors, constructors have previously reported that one of the key risks is that of the supply chain failure. How do you believe this risk has evolved over the last six months as inflation and material shortages have become more predictable? i.e. are you seeing that risk reduce?
Well, Alex, what we've seen so far is in the press is some failures in the sort of smaller general contracting fraternity. We've seen two failures from our perspective in the supply chain on our projects, both which we spoke about at the full year last year. We've not seen any more since then, and we've managed those, again, with the pragmatism of our clients well, I think, and without detriment to our numbers. We still hear a lot about tension in the supply chain. What we do is a sort of enhanced due diligence on our key suppliers, and we stay very close through our various programs of Advantage Alignment and so on.
We know our key supply chain very well, and we're not overly exposed to any one company because of our sort of regional nature. Overall, we've not been overly affected by it. You know, I've no reason to suspect that will change in the near future.
Great. Thank you very much. That's helpful.
Thank you.
Thank you very much, sir. Next question today will be coming from Mr. Greg Poulton coming from Singer Capital Markets. Please go ahead. Your line is open.
Hi, guys. Can you hear me all right?
Yeah, morning, Greg.
Great. Morning. Just had one on inflation. Andrew, you discussed this morning that you're seeing some inflation moderating in certain areas. Could you just give a bit more color on where you're seeing that? Then the second one was just on the interest income was quite high in the H1 of last year. Is that likely to repeat in H2 this year?
I'll take inflation if you want to take interest then.
Yeah.
Greg, inflation, as I said earlier on, inflation has generally moderated. We still see some price increases here and there, but generally, they're well signposted, so we know they're coming. Generally, of course, we are much better protected now contractually against the impact of inflation than we were right back at the start of all of this. But the key thing is not to confuse prices with inflation. In prices, we do not see going down yet. They've sort of plateaued, but the rate of growth has stabilized is the way I'd put it.
Okay.
It's much more manageable, Greg, is the bottom line.
Yeah. Okay. Understood. Thank you.
Yeah. Just on the interest point, Greg, there's kind of two main contributors to our interest income. One is the interest we get from the PFI portfolio. That's GBP 2 million, and that's, you know, very similar to last year. Last full year, it was GBP 3.9 million. I'd expect that part to continue at a similar level. Then the interest that we received from, you know, just on our cash deposits obviously increased this half year compared to previously. I'd expect that to be, you know, again, something similar in the H2 year.
Okay. Great. Thank you.
Great.
Thank you much, sir. We have a follow-up question now from Mr. Andrew Nussey from Peel Hunt. Please go ahead, sir.
Yeah. Just a quick follow-up from me. In terms of capital allocation, if we go back to when you reported in September, you gave a range which you felt average net cash and PPP assets, PPP assets combined would support the delivery of the FY 2026 target. Is that range still valid as you look forward sort of six months on?
I think the short answer, Andrew, is yes. That range which we, which we gave, which, you know, as the business grows to that GBP 1.6 billion turnover when we gave that range, that's still our thinking on that. No, no change.
Okay. Great. Thank you.
Thank you very much, sir. As we have no further questions at this time, I'll turn the conference back to Mr. Bill Hocking for any additional or closing remarks. Thank you.
Okay. Well, thanks everyone for joining the call today. Just to reiterate, we're really pleased with our performance in the half year, and we're in good shape to deliver in the full year too. I look forward to speaking to you again with Andrew in September. Take care. Keep warm. Bye-bye.