Hi, good morning, and I'm going to say a few words. Kelly will then go through the financial and operational review. I would then like to talk about Muse, our mixed-use partnership business, and then I'll talk about markets and outlooks, and then take your exciting questions, so look, overall, we had a really good year in 2024, and we had two profit upgrades during the year, so we're pretty pleased with the results. Now, clearly, we could not have had those results without the tremendous work done by all the people in our businesses throughout the group, and they've really gone for it this year, and I'd like to say a big thank you to everybody.
The high-quality order book is a big thing that's really improved in the year, and a lot of that is because Muse has had quite a lot of extra work. And that gives a bit of an indication of how the shape of the group is going to change over the next few years. Our balance sheet is a real fundamental thing for us. We feel that a group like ours needs a very strong balance sheet with substantial cash, one, because of our size, two, because of our ambition, and three, because we really do want to grow that partnership business. We also want a balance sheet that's going to give us the opportunity to make all the right long-term decisions in good times and bad.
A big differentiator for us is the fact that we're a very decentralized business, and holding onto that as we grow is always a challenge, as you can imagine, because there's always things that want to make you centralized. We really want to release the energy of our great people by having a very decentralized, empowered organization. Before I hand over to Kelly, I want to give you a bit of a helicopter view of the group. Fit Out clearly is our most mature business. This is the business we started back in 1977. We are the market leader. Our job here is to maintain that market-leading position, which often is much harder than getting there in the first place.
This is a business that generates cash, has negative working capital. Our construction services businesses, we see really good, strong organic growth potential, but we're growing those businesses carefully. It's about managing risk and taking on the right jobs that we can really deliver well. Indeed, in that business, in our construction businesses, if there's a tough market, margin and quality of earnings matters more than turnover.
Our partnerships business, which we're investing money in, we see as the growth driver, big growth driver for the group in the medium and long term. Partnership Housing in the medium term and mixed use in the longer term. I think that's a helicopter view of what we're doing. If I could hand you over to Kelly.
Thank you, John. Good morning, everyone. As John said, I'm going to take you through the financial and the operational review. We're going to start with a couple of key highlights from the group income statement. To start with, our revenues have grown by 10% to GBP 4.5 billion in the year. That's been followed by good growth in our operating profits, rising by 15% to GBP 162.6 million. That's been accompanied by an operating margin at 3.6%, 20 basis points up on this time last year. That's all down to the divisional mix profile, which we'll come onto in a short while.
Now, once again, we have benefited from higher interest rates on our strong cash balances, and that has led to a net interest income in the year of GBP 9.9 million. And in turn, that's led to a profit before tax up 19% to GBP 172.5 million, with a margin of 3.8%. That's 30 basis points up on this time last year. Now, when it comes to EPS growth, it's slightly down a few points at 13%, but that is all down to the highest statutory tax rate that we've experienced over the course of 2024. And finally, we're really pleased to announce that we are supporting a 15% increase to our full-year dividend, which has risen to 131.5p per share.
So, in summary, a really strong set of good results with double-digit growth across revenue, profit before tax, and our full-year dividend. So, let's take a quick canter through the performance split by division. So, once again, Fit Out has delivered a strong contribution to the group's results. Profits are up 38% year on year, and that's been followed by strong contributions from construction, infrastructure , and Partnership Housing, despite the slower pace of recovery in the housing market.
In Property Services, the division has now concluded on its business remediation program, which has resulted in losses for the year of GBP 17.8 million, and in Mixed Use Partnerships, profits were lower in the year as expected due to the phasing of scheme completions, so overall, operating profits finished at GBP 162.6 million, up 15% year on year. Now, for the first time, we are presenting a secured order book alongside our preferred bidder position, and we'll start with the order book. Now, as you can see, we have experienced substantial growth in the year, with the order book closing at GBP 11.4 billion. That's 28% up on this time last year.
Now, a big part of that substantial growth has come from Mixed Use Partnerships, where they have been successful in converting a number of large, sizable preferred bidder schemes into signed development agreements. But what remains incredibly important to us when it comes to our order book is we're not compromising on quality, the expected returns, or the level of risk we're prepared to take. At the end of the year, our preferred bidder position sat at GBP 4.9 billion. Now, that shows a 10% year-on-year reduction. But there's a couple of points to note here.
Firstly, it reflects the conversion of our preferred bidder work into our secured order book. But we also expect our preferred bidder work to be replenished as we gain more visibility of work from our existing frameworks and of later phases on some of our multi-phase development schemes. In summary, our total secured order book and preferred bidder work comes to GBP 16.3 billion for this group. That's 14% up on this time last year and provides us with a tremendously strong platform to deliver our future revenues for both the short, medium, and the long term. Now, when it comes to our cash performance, a very familiar chart here for you all.
And this sets out, over the course of the year, the group's operating cash inflow of just under GBP 135 million. But in truth, it's not how we see our cash flow through on a daily basis. We'll come on to that chart in a moment. But there are a couple of key factors I want to highlight to you. Firstly, in the year, we experienced a net working capital outflow of GBP 34 million. Now, of that, just over GBP 100 million is represented by our investment in Partnership Housing through the development of new sites and new partnerships. But in turn, that's led to a conversion of our profit to cash of 83%. Now, it's this chart that really does represent what happens on a day-to-day basis.
The blue line sets out the daily points all throughout 2024. The gray line does exactly the same for 2023. At the end of the year, our average daily net cash for 2024 was GBP 374 million. That's 92 million up on this time last year. But a few points to note. Our lowest cash point was in October of last year at GBP 293 million. Our highest was GBP 540 million one day before the financial year-end close. So, what do we draw from this? Firstly, at our lowest point, we still had a good level of headroom, together with our unutilized banking facilities.
But the other really key important point is, in a really short period of time, you can see how significant some of our cash swing movements can be for a business of our size and scale. At the end of the year, our cash stood at GBP 492 million, underpinning the strength to our balance sheet. So, as we look forward into 2025, we expect our average daily net cash to be in excess of GBP 300 million as we continue to invest in our Partnership Housing activities, together with Mixed Use Partnerships, to drive long-term growth.
Which leads me on nicely to the capital allocation framework, for which our overarching principle remains unchanged, which is to hold substantial levels of cash at all times. Now, the hierarchy itself hasn't changed since February 2024 when we last presented this, but it is worth reinforcing our commitments in the following order. Firstly, maintaining a strong balance sheet has never been more important to all of our stakeholders. Secondly, maximizing and optimizing investment to drive organic growth expansion in our partnership businesses.
Thirdly, maintaining the ordinary returns to our shareholders in accordance with our dividend policy, where we have a cover ratio between two to two and a half times. Fourthly, we continue to explore bolt-on investment opportunities where it can accelerate our expansion efforts within our partnership businesses. And finally, given all of these significant capital investment opportunities, today, we do not foresee a route to return capital, and so this leads me on to ESG. Now, ESG remains integral for us remaining and being a responsible business.
It's also a massively critical factor to our customers, both in the private and the public sector, and ultimately their end customers. In a decentralized business, the actions we take for ESG flow all the way down to a project level because that is where we will make the difference. But the bar is ever increasing in the ESG landscape, and we are seeing an expansion, whether it's regulation, legislation, directives. But what I want to do is share the highlights that we've made over 2024. And if we start with sustainability, for the fourth year running, we have secured the MSCI AAA rating.
And that's been followed by the A rating score given by the CDP for leadership in climate for the fifth year. Sticking again with sustainability, we are on track with our medium-term targets for Scope 1 and 2 emission reductions. Now, a little bit of a reference point here. 2019 is our baseline year, and to date, we have noted a 44% reduction in emissions. When it comes to our supply chain, who are an important stakeholder and a really important delivery partner for us, we pay 98% of their invoices within 60 days. And when it comes to protecting our people and safety, we are industry-leading, with over 90% of our projects being injury-free.
And finally, but by no means least, we have delivered over GBP 4.6 billion of social value to date. Now, whether that's through creating local jobs, supporting regional businesses, or helping communities becoming healthier and safer. So, I'm going to move on to the operational review by division, and I will focus on 2024. And in normal format, John's going to cover the divisional outlooks together with the market conditions prevailing within those markets. So, starting with Partnership Housing, now, this division has continued to strengthen its long-term partnerships with the public sector.
It's also continued with its short-term strategy to pivot towards contracting to provide an extra layer of resilience during a time when we have continued to see a softening in the housing market. As a result of this, we've seen revenues grow modestly by 3% to GBP 861 million. And within these numbers, contracting has strengthened, with its revenues growing by 19%, up to GBP 564 million. Now, despite that revenue mix profile, the division has been successful in delivering stronger margins in the year. And that's been through the type of contracting work that they've performed, but also the mix of schemes they've delivered.
As a result, operating profits increased by 18% to GBP 36.1 million, with a margin of 4.2%, up 60 basis points. Now, despite the short-term pivot towards contracting, partnerships remains at the very heart and core of our long-term strategy for this division. And you can see that evidenced by the level of investment we have made over the course of 2024 and as we've walked into 2025. So, as we look forward into this year, we expect the average capital employed to rise to a range between GBP 380 to GBP 400 million.
With a secured order book of GBP 2.2 billion, together with a further GBP 1.9 billion at preferred bidder stage, the medium and the long-term ambitions for this division have never been stronger. Now, trading performance for Mixed Use Partnerships followed an expectedly similar pattern to the first half, with profits at GBP 1.5 million, markedly lower than this time last year, but, as I said, a function of the phasing of scheme completions. But it's been a strong year this year for this division. It's secured a number of sizable preferred bidder positions into its order book by way of signing them into development agreements.
Its order book has grown by 124% to GBP 4.1 billion, and it has a further GBP 800 million of work at preferred bidder stage. So, as we look forward into 2025 for this division, we expect its average capital employed to rise slightly to a range between GBP 105 and GBP 115 million. Now, once again, Fit Out has delivered an excellent result for the year, and that's been driven by a couple of factors. Its revenues have grown 18% to GBP 1.3 billion. Its profits have risen 38% to GBP 99 million, and it's been supported by an operating margin, which is truly exceptional at 7.6%. Now, the outcome of this isn't just volume-led, it is also strong operational leverage.
The delivery, however, of this superb result by Fit Out relies upon their tenacity and laser focus on quality, project delivery, and the customer experience, everything this brand is known for. It closed the year with a secured order book of GBP 1.4 billion, 31% up on this time last year. Now, when it comes to construction, our strategy remains unchanged, with real focus on contract selection through to operational delivery.
And whilst we remain careful about revenue growth, there's been absolute prioritization when it comes to margin protection, and whilst we remain careful about revenue growth, there's been absolute prioritization when it comes to margin protection. It's these factors that have allowed the division to deliver good revenue growth of 8%, just over GBP 1 billion, but strong profit growth of 19% to GBP 30.9 million, with a margin of 3%, which is now at the top end of its 2024 medium-term targets. Now, this division continues to manage risk down further, with 98% of its work procured either through frameworks, direct negotiated works, or through a two-stage bidding process.
But furthermore, 85% of its work remains in the public sector, with education being one of its largest subsectors. It finished the year with a secured order book of GBP 1 billion and a further GBP 1.2 billion at preferred bidder stage. Property Services has had a tough, tough couple of years. Now, many of you will remember in August that I set one of my short-term key priorities to really support the division in concluding on its remediation program, and I'm really pleased to say the division has wholeheartedly achieved that.
And in particular, it specifically addressed some of the key remediation points that we set out in February of last year, but as a result, we have recorded operating losses of GBP 17.8 million. And that's been led by the exit costs for a small number of underperforming contracts, which we negotiated an early release from. We've also undertaken a review of all of our contract assets, and we have concluded on our operational restructuring efforts across the whole portfolio. Now, like in previous years, these operating losses form part of the group's normal trading results. We don't treat this as an exceptional cost.
We are, however, pleased to say that the business is now set up to deliver a modest profit in 2025. And finally, Infrastructure. Now, Infrastructure follows a very similar strategy to construction, with real focus on contract selection, the right commercial terms, through to operational delivery. And it's these factors and disciplines that have driven the strong revenue growth it's experienced in the year, where it's 18% up to just over a billion. However, profits have remained flat at GBP 38.5 million when compared to the prior year, but that really is a function of the phasing of scheme completions and new starts.
Margins closed at 3.7% for the year, right in the middle of its current 2024 medium-term target range. However, 2024 has been an exciting year for this division. It has been awarded over GBP 2.5 billion of work over the year. Now, not all of that is in its secured order book or even in its preferred bidder work. It finished strong at the end of the year with GBP 1.9 billion in its secured order book, with a further GBP 700 million at preferred bidder stage, so I'm going to leave John to talk a little bit more about Mixed Use Partnerships.
Thank you, so Muse joined the group from when we acquired AMEC back in 2007 and had been going for about 10 years beforehand, so it's had, you know, quite a long time to sort of start to get to know what it's doing. You need a long time in this business because things happen very slowly. It's all about long-term placemaking and multi-phase, so each of our projects, we have many, many phases to them, usually over many, many years. It's very much a national business based in London, Manchester, Leeds, and we opened up in Birmingham three years ago. Every project we do is in partnership, but usually with multi-partners.
Now, how do we make our money? We make our money from our profit on the share of our equity and the development management fees that we charge for managing the entire development. The majority of the projects are forward funded, and that's pretty fundamental to get the right ROCE. Now, obviously, the development order book has gone up very substantially, and of course, that GBP 4.1 billion is our share of the developments, not the gross amount. So, these are a list of the current partnerships that we have. As you can see, the majority of people are local authorities, and that's. They tend to be our customers.
And as you can imagine, if they want to start and enter into a contract with us for 20 or 30 years, they will spend a lot of time doing their homework, talking to other local authorities to find out what their experience has been. Now, that is a huge barrier to entry. And we have, over the years, spent a lot of time, even on the toughest ones, not walking away from it, but staying there to make certain that that development happens. And sometimes it's taken a lot longer than we would like to get on site. ECF's a very interesting one. That is a partnership between us, Homes England, and Legal & General that's been going now for over 20 years.
And in 2019, that fund was increased to GBP 200 million, and we always, we've always got four or five developments on at any one time in that partnership. But as you can see, a lot of partnerships, a lot of them are up north and not so many in central London. So, we look at the order book and how it's sort of moved over the last year. On the left-hand side, there's the four jobs that have gone from being preferred bidder to having contracted development agreements. Interestingly, Arden Cross, Wolverhampton, and Solihull are all for our new Midlands region.
So, obviously, that job so far, that region so far has lost money, and it's going to take another two years before it goes into profit. We've got the four new preferred bidders. We've also, interestingly, won three this year to date: Hull, Wakefield, and a northeast scheme that we can't quite announce yet. The order book on the right-hand side shows how the business has sort of been pre-transformed by its order book in the last year. What I'd like to talk about are three different schemes just to give a bit of color as to what we do. This is one that we've been working on for 20 years, an ECF one.
Many of you would recognize that very famous river, which is the, goes on the outside of Manchester. To the left is Spinningfields. Manchester is a very unusual place where the prime real estate is right on the edge of the city. And our site is the site on the left, on the right, which effectively was a car park for Manchester city centre. So, the scheme over the last 20-odd years has been completely mixed-use with multi-story car parks, up to 2.2 million sq ft of commercial space, and about 1,000 homes. The 1,000 homes are the white blocks at the back.
Interestingly, the green building is the largest living wall in Europe, and Muse has a real reputation for being very innovative in what it does in order to make real places that change communities both socially and economically, so this is a very typical thing, but you can see a scheme like this that takes 20 years, why it takes a long time to get a track record and experience in a business like this. This is a job we're just starting in St Helens. It's a 20-year multi-phase partnership over many sites. The first phase, very typical of what we do: a new bus station, a new market hall, offices, and residential in the town center.
What I think is interesting, and we could, we could have done it either way, but the way we cast our order book, we've only got the first phase in our order book, even though we have a 20-year exclusive signed development agreement. So, clearly, we would expect to win quite a lot more. If we add up that over a number of jobs, that would add another billion to the order book. A job here of a very different scale, Arden Cross, in the middle of the site is, which is now a big field, is a new HS2 station being built. And our development agreement here is for 30 years. We were preferred bidder in 2022. It took us two years to get the development agreement signed.
It's now going to be four years before we get on site, and then we'll be on site until about 2054. So, it's a very long-term scheme. And when it's completed, the commercial area alone is expected to employ about 27,000 people, which gives you some idea of the scale. And there's a small amount, well, I say small amount, about 3,000 new homes as well. The first phase is likely to be a new campus for Warwick University. So, if I just sort of summarize Muse, there's a very strong track record of delivery, which takes a long time to put together. In a lot of ways, and it may sound surprising, it's very similar to Fit Out.
It's a market leader in a very specialized market, and it's a business that's taken decades to get that experience and expertise and to really know what it's doing. They're both businesses where a strong balance sheet is absolutely fundamental. But there are also differences. This business obviously has a very negative working, very positive working capital as opposed to negative in Fit Out. The other thing is, because Fit Out jobs are small, we have to win a job every day. In this business, we're getting to the stage where we don't have to win a job every year. So, we can be very selective in what we go for. But it's all about long-term profit streams.
And we have been investing for growth here. Probably nearly half of our overheads, GBP 8-GBP 10 million a year, is spent on non-income-producing activities today. That is winning new jobs, working on the jobs where we are preferred bidder, and working on those jobs where we have a contract, but we're not yet on site and therefore not earning money. So, that's been quite a heavy investment over many years. So, now I'd like to move on to markets and outlook. And the first thing I'd like to do is just talk about our medium-term targets, which we've increased four of them today from what we had before.
Partnership Housing remains the same, 8% ROCE and up to, sorry, 8% margin and ROCE up towards 25%. With mixed use, we've increased the ROCE up towards 25%. And we're doing that because we are seeing a larger number of jobs coming through so we can spread the overheads over more jobs. And we're also seeing good margins or good ROCEs on the jobs that we're winning. Now, with Fit Out, we're upping it to GBP 60-GBP 85 million from GBP 50-GBP 70. You might argue that that doesn't sound a lot, bearing in mind that our profit was GBP 99 million last year. I think we've got to recognize that, one, we've had a very strong market in Fit Out.
Our margin was unbelievably strong. We also had a year where our biggest competitor went out of business, a company called ISG. And clearly, we had some extra work, not because of that, but they went out of business, but with our strong balance sheet, we were picking up work probably for the last 18 months more than our normal fair share. But of course, that market is now going to change. Everybody needs competition. We need competition. The market wants competition. And a lot of people are seeing the sort of profits we're making and think it's quite good. It's a tough gig, Fit Out, I have to tell you, to anybody listening.
But there are, you know, three or four firms now who have taken on a lot of the ISG people, and they will be a strong player in the market. So, we don't quite know how the market is going to pan out, but we're determined to keep our market leadership position. So, with Construction, we've increased the expected margin or the medium-term margin by 0.5%. And the turnover we've now said is going to be in excess of GBP 1 billion rather than GBP 1 billion. And that is purely as the business is just getting better at what it's doing, getting more repeat business, just getting a better business.
It's pretty similar in Infrastructure where we've upped it by 0.25% from 3.75%-4.25%. We've Property Services the same and operating profit of GBP 7.5 million a year. Clearly, we've got a little way to go to get there. If we look at the outlook, I think there's one big issue I'd like to talk about, and that is obviously the National Insurance increase and the inflationary effect that's going to have. That is definitely a headwind for us. To some extent, we're going to be able to mitigate it. In others, we're going to be able to absorb it in our normal trading. But it certainly is a headwind for the business, as indeed it is for lots of businesses.
With Partnership Housing, we expect a growth, you know, solid profit growth this year. We expect ROCE to be pretty similar to 2024 as we're continuing to invest in that business and winning new partnership schemes. With mixed use, we're expecting very modest, very modest profits over the next couple of years, reasonable profits in the medium term, and significant profits for the group in the long term. Now, the Fit Out market, we expect the profit to be towards the top of our revised range. It's still a good market, and as you notice, we have a very good order book.
With construction, we would expect the revenue to be more than a billion and indeed more than GBP 2.4 billion, with a very similar margin to 2024, which would be at the bottom of its new target range. With Infrastructure, we would expect the margin to be in the middle of its revised range with pretty flat revenue. Although we won a lot of work in 2024, a lot of that work isn't going to get on site until 2026, 2027. Obviously, Infrastructure is a business where we have huge visibility.
Construction, we have less visibility, and Fit Out, we have less visibility again, is the way it sort of works between those businesses, and Property Services, we expect a very modest profit in 2025, so if I just summarize, look, we've got a lot of energy in the group, and, you know, our decentralized organization is throwing up lots of ideas and really going for it. It's all about organic growth. If we do an acquisition, it will be a bolt-on purely to speed up organic growth.
Broadly speaking, it's about organic growth, and it's about all the people in our businesses looking at those businesses and how can they make them better and better and better again, because that's what it's all about. And that's how we can actually really grow the business and, you know, have a better business. We talked about the strong balance sheet. We're not going to let go of that. That is fundamental to us. And I'm really pleased that we've been able to increase the medium-term targets in four of our six divisions today. I'd like to just end by saying we're on track to deliver an outcome for 2025 in line with our current expectations. Thank you.
Good morning. James Booth from HSBC. Can you just talk a little bit about the profile of the order book? How much of that is for delivery in 2025, and how does that position compare to this point last year?
Okay. So, look, I think in the RNS, we do set out the phasing slightly more accurately. But I think broadly speaking, Construction and Infrastructure are well set up. Construction is well set up for a good secured order book to deliver revenues for the forthcoming 2025. Infrastructure, as John has highlighted, it's got quite a tail to its order book because these schemes go out for a longer period of time, but it's still in a very strong position to deliver its revenues. Fit Out, we have set out some guidance again in the RNS, which talks about just over a billion, which will come out of its GBP 1.4 billion secured order book.
And that computes pretty much to the guidance we've given you for this year. When it comes to the partnership businesses, there's a real sort of tail, medium- to long-term, and that's much more prevalent with Mixed Use Partnerships, which really does go out to the medium- to long-term cycle of its schemes, Property Services, it clearly runs to the average tenure of its three- to five-year schemes. So, we're in a good place from a secured perspective.
Thank you. And also, you mentioned in Partnership Housing that you had increased the construction within the mix. Can you give a sense of where that is and ultimately where you expect to take that to hit those medium-term targets?
We would expect in the medium- and long-term the construction to be a smaller percentage of the whole. We took the opportunity to do more construction when housing for sale was slower. But also, we have a situation where quite a few normal housing contractors went bust, and quite a lot of the housing associations really wanted a contractor with a good balance sheet, which was also an opportunity for us. And that way, we were able to sort of grow the profit even though the housing for sale market was very slow.
And then one final one, if I may, just on National Insurance. How do you expect that pressure to manifest itself over the year ahead, and how do you expect to kind of manage that through the business? Thanks.
And it's probably fair to say it varies from business to business. On some jobs which are cost-plus, we're able to pass it on to the clients. When we're quoting for new work, we'll be able to pass it on to the clients. And some of it, we won't be able to pass on, but we expect to be able to absorb it within our existing budgets.
I would add to that that we have had a good track record, of course, in previous years when we've gone through inflationary cycles. And I think the beauty of, particularly when you look at construction, which typically enters finally into fixed-term, fixed lump sum agreements, the length of those projects don't go on for years, so they can average six to nine months. And so, therefore, we can cycle out the inflationary pressure quite quickly.
But it's definitely a headwind.
Yeah.
Thanks. Aynsley Lammin from Investec. I think I've just got two, actually maybe three. Just on the partnerships for housing, obviously unchanged medium-term targets. Have you become more excited about the potential growth potential, what you could kind of invest in terms of capital in that business on a medium term? Just maybe some color around, obviously, we're hearing the kind of housing associations a bit stretched at the moment, looking for government funding, just some color around the impact of that you might be seeing. Second question, just more general on cost inflation.
Obviously, you mentioned the employers' NI, but just interested in what you're seeing elsewhere. And thirdly, just on bolt-on M&A, you mentioned you may be interested. Any opportunities there? Is that looking at something that could be imminent this year or just something on the radar?
I think with the bolt-on acquisition, we might not do anything at all. We've only mentioned it just so it doesn't come as a big surprise if we did something. But also, we don't want a situation where people don't give us the opportunity to look at something. But it's not in our plans. It's not. We're not relying on it in any shape or form. When we do our medium-term targets, they're never the limit of our ambition, and we look at them again when we get there. But we do see Partnership Housing as a business that can grow quite dramatically.
I think just to pick up on the inflation point or cost inflation, I think the large factor there really is wage inflation, which we've talked about.
Thanks. Jonny Coubrough from Deutsche Numis. Can I ask just a follow-up question on National Insurance? Was there any impact in FY24? I know it hasn't come in, but just from contract accounting and making cost assumptions.
No, I mean, I mean, look. We do experience cost inflation from time to time, but it's not prevalent or material. Sure.
Okay. Thanks, and in terms of Fit Out, you mentioned, John, the competitive environment picking up. Do you see the overall market as growing at the moment? And also, you mentioned winning a job a day. Are you able to give us an idea of the range of contract size within the mix at the moment?
The range is from a few hundred thousand to several hundreds of millions, but when I say talking about the market hotting up, I say the competition is going to change because obviously we had ISG, who were very big competition. It's going to be different, and you never quite know what different looks like until you see it. But also, if we look at the market, long term, the office fitting out market has grown at a much faster pace than GDP. I suspect we've had a really strong market, and we might have a quieter market for the next few years.
Thank you. And then just a question on Partnership Housing because it was interesting to see the margin improve despite a higher contracting mix, which tends to be lower margins. So some context on what happened there would be helpful.
It really is as simple as the type of contracting schemes that we've negotiated. So again, a lot depends on our procurement route, the terms, but there's no one call-out area. I think we've been particularly strong this year. But as John has said, over the medium term, we expect to remove our reliance on that stream of work whilst continuing to be in that space and move much more back into the mixed-tenure space.
Thanks. And last one is whether you've seen any pickup in private sales rates in the housing market.
I think we're no different to the other house builders. And obviously, we look at their rates and our rates, and they're pretty similar. Below where we'd all like to be, but slightly better than last year. Yeah. Thank you.
Good morning. Andrew Nussey from Peel Hunt. Again, a couple of questions, maybe do each in turn. But first of all, in terms Property Services, if we adjust for all the subcontracts which have been brought in a mutual agreement, what is the underlying revenue run rate at the moment? Is that at a level where you can deliver GBP 7.5 million of profit, or is there an expectation of growth in that business to get to that level of profit? Is the first one?
Try to hear that one. So if we adjust those contracts that we've moved out of, probably anywhere between about GBP 150-GBP 170 million. Yes, what we're expecting is to get to GBP 7.5 million. Contract renewals, growth within those contracts through further capital planned works or planned maintenance. Yes, we would start with our work-winning efforts now, which, as you know, we put a temporary hold on.
Okay. Second question, sort of around capital allocation. If I picked up correctly in the presentation, Kelly, bolt-ons would be within partnership as opposed to any other partnership.
Obviously speaking. I mean, look, we're not ruling all the other areas out, but they would have to be truly accretive, exceptional for us to consider.
Okay. And just sort of in terms of those medium-term targets, what's sort of the implied average capital employed within the regeneration businesses? It feels like perhaps in partnership getting up to GBP 500 million and maybe a couple of hundred million in mixed-use.
So what I would say is that whilst we've given guidance for 2025, we don't actually have a limit on particularly Partnership Housing. I could foresee that we'll be much more moderate on Mixed Use Partnerships, but unlikely to exceed the numbers you've talked about.
But we certainly would like to have the space to grow those businesses much faster if we can find the right opportunities.
And sort of last question more around mixed-use. These are obviously very long-term projects. What sort of safety levers do you have in there if returns aren't going the way that you would like?
So, most of these agreements, we set it up where we have an agreed margin, and that then gives you the land value falls out the bottom. And every time we start a new phase, the calculations are done. So, it's only per building or per phase of those long-term agreements that we're at risk.
I can't say no.
Yeah. So, I think the key point here is multi-phase, and each phase is treated as a separate obligation.
Great. Thank you.
Alastair, the analyst from Progressive. A couple of questions. First, on defence, the Prime Minister made a fairly fundamental statement yesterday. Can you briefly run through the defence work you do, any early conversations you've been having? Obviously, they'll be very sensitive.
And is there any evidence that budgets are being moved, cash is being moved out of other budgets, for instance, transport that you're involved in? That's question number one. Second question is ISG. You said there needs to be competition. I believe you said it when they did go bust. But have you actually seen any meaningful new competition coming into the areas that you generally win work?
So if we take Fit Out first, yes. There are three or four businesses who were smaller who've taken on a lot of the ex-staff from ISG, and they are very credible competition winning work in the marketplace. As far as defence is concerned, both our construction business and particularly our Infrastructure business do a lot of work in defence. But it's probably too early to know what the statement he made yesterday will have. But certainly, there's quite a lot of defence work we are talking about at the moment. But you're absolutely right. Money's going to have to come from somewhere, and we're very mindful that other budgets could well be reduced.
Just thinking further on that, the increase, more troops will require more housing, or is it much more of a high added value end of things, the sort of IT and so on?
Well, and I forgot to say, Lovell have built quite a lot of housing for the military as well. Yeah.
I think also, Alastair, it's probably too early to say, but as an organization, we are set up to support the government on its ambitions, whether it's housing or whether it's defence. [Inaudible]
Hi. Thanks for the presentation. Just a couple of questions from me. So firstly, on Fit Out margins at 7.6%, I think the slides refer to contract mix and type and operating leverage. Can you just give a bit more detail on that? Is it a certain number of big projects? What exactly is it about the contract mix and type that makes them higher margin? And how do you see that flowing through into 2025? I know you've guided at a kind of adjusted EBIT level, but in terms of the margin dynamic of that?
Try to take that one. Okay. So yes, the 7.6 is exceptional. It is impacted by a number of projects, which we clearly don't talk specifically about, Rob. It is exceptional, as you've heard us say a few times. In terms of guidance, I think you should be looking in a normalised period anywhere between 5.5, the top end probably 5.75, perhaps 6, but no more than that. And that would still be using some operational leverage.
Okay. Thank you. And then on Infrastructure, I guess it's guidance for more than GBP 1 billion revenue business with a good margin. Could you give a bit more detail on the end market breakdown? Because I guess the statement refers to defence, energy, nuclear, there's work winning in water, etc. But if we were to kind of put the different types of work into different buckets, can you give an indication of what they are as in the weighting?
We don't disclose the I mean, in the RNS, we do provide a little bit of an indication, but we don't specifically disclose. They are significant sums. And I guess the important point to note is, particularly with water, whilst we are prevalent in water, we're not massively exposed to water. We've been very open about the markets that we are very excited about and can achieve some good sensible returns from being power, energy, etc., and defence. So that's probably where most of the weighting lies.
And nuclear.
And nuclear, sorry.
Understood. I'm sorry I know I said T, but one quick follow-up. So in mixed-use, I know there's a question earlier from Andrew, I think, on effectively what could at scale capital employed be? Because I guess you've got several slides in the deck. You talk about the kind of great long-term projects, and we've seen capital employed up to 25%. And I think you said it could be a 200 million type capital employed at scale. Why is that not 500?
It's probably not that much because, as John said, even before we get to the capital employed investment stage, we are already investing through our own overheads. So you've got to look at the two almost together that we're expensing a lot of our investment because we put it at risk to get to a signed development agreement.
And then, of course, when we are at a development scheme arrangement situation, then, of course, we will still be sinking in our investment, whether it's supporting on the planning or other activities, but we recycle it quite quickly. So the composition is constantly changing. So as much as on the surface it might be growing incrementally, the composition is changing quite significantly.
Understood. Thank you.
Hi, Stephen Rawlinson from Applied Value. Just on Partnership Housing, another question Property Services. but on Partnership Housing, can you just remind us of the total build during the course of last year of new dwellings and whether you're starting to see any economies of scale as you might start to grow that? I recognize that mixed tenure was down a bit last year. And allied to that, in terms of government policy, are you seeing the Housing Minister move towards using contractors rather than necessarily depending upon one-off agreements to get new properties?
And therefore, that might benefit the way in which you've approached this business as opposed to sort of the larger giants in house building. So that's on Partnership Housing. So it's about sort of the total and just remind us of that, the economies of scale and so on. And the second element is Property Services. i know you've been a great advocate of that over many years, John, and the losses over the last two years are quite significant. Modest profit next year, target of about suggests just looking at the numbers around about a 3% margin.
Just in terms of your ability to get economies of scale in there, in terms of your ability to use IT, two or three years ago, you talked about the IT system, goldeni, I think it was called, but that seems to have gone off the agenda. Are you able to compete in that effectively given the scale and given the IT developments that others are introducing as well? So just sort of talk us through that to help us understand how we get to a modest profit this year and that GBP 7.5 million that's been a target for, what, 18 months now? And it is realistic. It would seem as an outsider, but nonetheless, it's still a long way from where we are. Yeah.
Look, I'll answer the difficult one first and leave you with the easier one. Property Services is not being our finest hour, but we're pretty confident that we can get a modest profit this year. Clearly, we have quite a lot of work to do to have a proper plan to know how we're going to get to substantial profits.
And clearly, the 7.5, which would be our medium-term target, really wouldn't be a big enough profit to justify having it in the group long term. But we're pretty confident that we're going to get there. But the fact that we've made so many mistakes in this division must mean that we've learned something. And if we treat every mistake as a learning opportunity, we should do very well going forward.
Okay. Sure. I'll take the tricky one now. So in terms of homes we've built, and I'll look at the total proportion now. Under contracting, we've probably delivered about 3,300 homes and 1,800-ish under the mixed tenure. So that's what, 5,100, and maybe about 874 of that is open market private sales. Yeah. So the open market sales are notching up, but we're not getting massively excited. It's in sync with what we're seeing elsewhere in the market at this point.
The contracting element is going up as well.
It is. It is. Of course, it is.
Are you getting a strong reception from the Minister of Housing with regard to how you might progress in that area? Because that does just seem to be the trend at the moment and just now those conversations are proceeding.
It's early days in those conversations.
It is. There's engagement. Thanks for calling.
Toby Thorrington from Equity Development. Two unrelated questions from me, please. Perhaps the easier one for John first. Have you seen any supply chain churn, stress, changes in your own supply chain to comment on?
Yeah. I think the supply chain and the solvency of the supply chain is probably one of our biggest risks. Luckily, we mitigate it because each of our businesses have a different supply chain, and each of the regions tend to have a different supply chain. So it's a nuisance, but it's cumulatively a problem rather than on a single basis. But it is a big issue.
So there has been churn, you would say, during the year?
Yes. We have had people in the supply chain who've gone out of business.
Yeah. Okay. And the other question is more general. The statement references in a couple of places challenging planning conditions. That doesn't exactly chime with some of the other things that we're seeing and hearing in the sector. Is that sort of division-specific, or is there a general comment you'd like to make on that?
I think most would say that planning is getting a bit better, but it's not perfect.
I think it's also referencing specifically, and this is the partnership businesses, where the speed in which the planning reforms will be really well understood together with the resources. I think it's really sort of targeting that. But you're right, John. I think we are seeing some minor incremental improvements, but not wholesale yet.
Right. Understood. Thank you.
Any other questions? Yes.
Just one last question and probably a bit of a washing-up one. GBP 47 million spent by the cash outflow on buying shares for the trust in the balance sheet. Sorry, in the cash flows. So large chunk of change, GBP 11 million the prior year. Is that GBP 47 a one-off, and can you give us an indication of the more normalized level that you might be spending on shares for the future, please?
It's just a function of where we are with our various share option schemes, etc. And of course, where the share price has been. But it will normalize a little bit and take a midpoint between GBP 11 and GBP 47, but it won't be as high as GBP 47 in the forthcoming periods.
Any other questions? Thank you very much for your time today. Thank you.
Thank you.