I'm gonna do a brief introduction. Steve will go through the financial and operational review and indeed the ESG update, and I'll come back and talk about strategy and outlook. Look, we're really pleased that we had record results last year, particularly as with inflation and other market headwinds. It's quite interesting because none of our staff or very few of our staff have actually had to manage the business through inflationary times like this before. It's because they've done such a great job being patient and tenacious that we're able to have the results that we've got, and I really want to thank them very much indeed. It's not just our staff, it's also our supply chain and our customers who've had to work with us, and we've had to work with them to find ways to get jobs to work.
I'd like to thank them all as well. Our balance sheet is really important to us, and I know you've heard us bang on about that before, but it is really important for us to win the long-term work that we are winning. Our clients want to see it, our supply chains want to see it, and we are committed to having significant daily cash at all times
We come into the year with a high quality order book, but perhaps even more importantly, good prospects and a good pipeline of new potential work across most of our businesses. We've taken the exceptional Building Safety Charge, which we flagged up previously. In these sort of interesting times, our very decentralized empowered organization is able to move apace to adjust and increase our market shares in all of our businesses.
We're now in a position where we're looking forward with a lot of optimism and expect to deliver results in the full year to 2023, which is in line with our expectations. It's now time for me to hand over to Steve, who needs no introduction, but he does like one. Steve.
Thanks, John, and morning all. First then, I'm gonna cover the financial and operational review, and then after that I've got a few slides on our ESG performance. Just taking the income statement first, and just to clarify that the numbers shown here are on an adjusted basis. That is, they're before the impact of the exceptional Building Safety Charge, which I cover in a later slide. As John said, despite the market headwinds and general economic uncertainty, 2022 was a good year for us strategically, operationally and financially. Revenue was up 12%, operating profit up 6%, profit before tax up 7%, all moving in the right direction.
Operating margin, however, was down slightly, probably not surprising, down to 3.9%. Inflation would have played its part in this, although the precise impact is actually quite hard to quantify. EPS was up 5%. The total dividend for the year was up 10% to 101 pence per share, representing a really comfortable dividend cover of just under 2.4 times. Just looking at the split of results by the division. We've got the first two here, Construction & Infrastructure and Fit Out being the biggest contributors to profit. An excellent performance. Again from Fit Out, profit up 18%. A steady one from Construction & Infrastructure with its margin at a healthy 3.3%.
Strong operational performance drove Partnership Housing's profit up 13% to GBP 37.4 million. We had a much improved result from Urban Regeneration, which was up 56% at GBP 18.9 million. Finally Property Services, which contributed GBP 4.3 million of profit. As I said, all against a backdrop of more challenging market conditions, which John will cover in more detail in his section. On to cash, and you can see the operating cash flow for the year, a cash inflow of GBP 48 million. Now on the face of it doesn't really seem a great cash conversion performance, but there's a few points just to draw out to explain some of the moving parts here. The main driver is a working capital outflow of GBP 64.5 million, which is shown here in the box.
Within this, GBP 56.7 million of it is working capital investment, specifically in the regeneration activities of Partnership Housing and Urban Regeneration. Then in addition to this, included in column C on the chart here, which is the non-regeneration working capital, there's also been a significant increase in Property Services working capital in the year of around GBP 25 million as that business funds its new contract mobilizations and top-line growth. Just cutting through all of this, the key overall takeaway here is that there's been no significant change to our underlying profile in debtors and creditor payments. Just on the subject of creditor payments, I've also included a slide at the back of your packs which shows our latest reported payment practices to our supply chain. As we've said before, this is an area which remains a key strategic competitive advantage for us.
This is our usual slide. It shows our daily bank balance every day of the year. That's the blue line on this chart. The average daily net cash for the year was GBP 256 million and as expected, was lower than last year. Nothing to get too concerned about, just the usual ebb and flow of working capital movements and the investment in our regeneration businesses in the year, which I've just touched on. Importantly though, the lowest level of cash on any one day was GBP 179 million. Plenty of headroom and comfortable. This allows us to continue making the right long-term decisions for the business to best position ourselves for the future, whatever the macro climate is. The highest day was GBP 368 million, and net cash at the year-end was GBP 355 million.
Cash-wise, we're in really good shape. Based upon where we are now, we expect the average daily net cash for 2023 will be at a broadly similar level to that which we've just reported for 2022. Around circa the GBP 250 million mark or so. Just to be clear, that's after the expected impact of the Building Safety outflows and inflows. Just on Building Safety. As I'm sure you're all aware, the government issued its final long form contract for the Developer Pledge last month. We formally expressed back to government our intention to sign up, and we're now just following the process to execute within the requested timeframe. This for both Partnership Housing and Urban Regeneration.
Therefore, as a consequence, as we flagged at the half year results in August, we've therefore now taken an exceptional charge to cover our pledge obligations totaling GBP 48.9 million. This is within the range which we'd previously indicated. Just to note once again, this is a gross number and does not include the benefit of any remedies which are being pursued. Just briefly on the balance sheet, the Building Safety Charge I've just mentioned is actually split between the provisions line at the bottom and the joint venture line third down. I've talked about the cash. We've no pension issues, and so with net tangible assets of around GBP 275 million, our balance sheet provides a really strong and solid platform to support us as we move forward. Looking forward onto workload.
At a group level, the total order book was a very healthy GBP 8.5 billion, albeit 2% lower than last year. Within this, the construction order book was up 2% while the regeneration order book was down 6%, both measured against the same time last year. As always, though, much more important than just the headline number is the quality of the order book in terms of margin and risk. The key message here is that we've not compromised on quality or compromised on our expected returns. We've maintained the right risk profile for us, and with this high quality workload, we feel well set up for the future. Those are the group headlines. Good profit growth, strong cash position, strong balance sheet, and a high quality workload.
If you just look a bit closer now at the divisions, I'm gonna just focus on the numbers in this bit and leave the markets and outlook to John. Firstly, Construction & Infrastructure, as I mentioned, a steady performance with revenue up 3% and a margin of 3.3%. As we've said before, this division is all about consistent delivery, disciplined contract selection, and focused risk management. We've now got a business here where the vast majority of its projects are only delivered either through frameworks, two-stage processes, or are directly negotiated with the client. This slide shows the results a bit deeper, which is split between the two activities. On the construction side, profit was up 3% and the margin of 2.8% was bang in the middle of its target range.
This despite construction really being at the sharp end of inflationary pressures and strain on the supply chain. Infrastructure's performance was lower than last year, as expected, and was due primarily to project timing and the nature of the workload in the year. Its margin, a very healthy 3.9% at the top end of its target range, demonstrates the benefit of Infrastructure also focusing on consistent operational delivery and disciplined job selection and not being sidetracked by chasing big, high profile projects which don't fit our risk criteria or our operational capabilities. Construction and Infrastructure both have substantial workloads.
In addition, on top of its order book, construction also has visibility of over GBP 750 million of work at preferred bidder stage, much higher than at this time last year, giving you evidence, if you needed any, that there's still lots of high quality construction work out there to be won. For infrastructure, we've had a few project wins post the year end, which will be signed up in 2023. We're still winning work and of the right quality, and therefore, we're not concerned about the 6% year-on-year reduction in what is still a very large overall total. For Fit Out, another excellent result. Profit of GBP 52.2 million, up 18% on last year, with revenue up 22% and margin of 5.4%.
This is all about superior operational delivery matched with an obsessive focus on all round customer experience. On the right-hand side of the slide here, you can see the analysis of revenue split by type of work, sector and geography. In short, there's been no significant changes to the overall balance of the business. The London commercial office sector still remains the most important to Fit Out. It's worth just a few moments on Fit Out's order book. At GBP 841 million at the year end, this is a substantial order book, despite it being 6% down on last year. If you remember, last year itself was an all-time record. The key is what is secured for 2023 and what else is in the pipeline.
Firstly, you can see here on the slide that as at the year end, the order book for the next 12 months, i.e. for 2023, was GBP 591 million, and this is actually 12% higher than the corresponding amount at this time last year. These are secured orders already in the bag. On top of this, we've also got in excess of GBP 100 million worth of work already in preferred bidder. We've got over GBP 300 million of work already bid for and pending a decision, and a further GBP 200 million plus of work at tender stage. Lots of activity in Fit Out, giving us a really high level of confidence in future demand coming into the year. In Property Services, profit was up only slightly to GBP 4.3 million off revenue, which was up 22%.
This is one division where we've struggled to recover cost increases in the year, so we've effectively had to swallow most of the impact of cost inflation in these results. Hence the lower margin despite the significant uplift in revenue. The main reason for this non-recovery is that in many of the divisions responsive maintenance contracts, price adjustments for inflation are only operated annually in April and are based on a historic index, which is mainly CPI. We've not yet had the benefit of the uplift, which would cover inflation through most of last year. This should come through in 2023, thereby setting us up for a much better year. The divisions order book is long term, with contracts tending to be up to 10 years or so in length.
At GBP 1.2 billion, up 27%, we've got really good long-term visibility of work streams here. We've got plenty of work, which gives us critical mass. We now need to focus on operational delivery. In Partnership Housing, revenue was up 22% to GBP 696 million. A business now really starting to get some scale. Profit was up 13% to GBP 37.4 million with a margin of 5.4%, slightly diluted by the impact of higher contracting revenue in the year. Returns on capital for the year was 19%, which is slightly lower than we'd targeted, but primarily as a result of the investment in the capital employed in the business, with average capital employed increasing by over GBP 40 million in the year as more partnerships and developments come on stream.
This investment is expected to continue as we focus on the long term with capital employed for 2023 expected to increase further to around GBP 250 million. Now on the mixed tenure side, which includes some open market house sales, we experienced the same dynamics, industry dynamics in the year as the rest of the house building industry and saw the same slowdown in private sales in the fourth quarter. However, strategically, we're making real progress gaining scale with 58 mixed tenure sites now on stream, whether in construction or in sales, up from 48 sites this time last year. With the order book also now just shy of GBP 2 billion, up 32% on this time last year, this gives us confidence that we're moving in the right medium and long term direction.
For Urban Regeneration, a much improved performance with re-return on capital in the year hitting its 20% target and profit up by 56%. This profit was generated across all sectors and geographies. Although the order book was down 28%, don't read anything into this. These are large schemes which take time to bid and therefore come less often. When they do come, they obviously come in big chunks. An example of this and a really exciting win for us, which is not yet in the order book, is at Arden Cross, Solihull, where we're the preferred bidder on a very sizable long term mixed use scheme, which is just by the M42.
This will provide activity and profit for potentially the next 20 years or so. The message here is there's lots going on in regeneration, and we're bidding and winning the right quality of schemes we want for long-term success. Looking more short term, with all the various ins and outs on the schemes planned during this year, our best view at the moment is that the average capital invested for 2023 will be around GBP 100 million or so. Broadly, therefore, similar to 2022. In summary then, I hope I've got the message through. We're in good shape, really good shape. Profit up 7% in the year despite inflation and despite the general market headwinds. Our continued balance sheet strength gives us confidence, and we've got a high-quality visible workload.
Not forgetting that based on all of this, we've also increased the total dividend for the year by 10% to GBP 1.01 per share, a very comfortable dividend cover of 2.4 times. Where are we on ESG then? Hopefully this slide is familiar to many of you. Just to recap, we refer to our responsible business agenda in terms of our total commitments, and these provide a framework for a common strategy focused on all our stakeholders. We've been using this framework since 2008, so this is not new. These commitments for us fall into 5 headings or categories, if you like, which is shown here. Each has a range of KPIs used to measure progress and performance over a number of areas.
We formally report against these every year, whether they're good or bad. You can find details of these all there for all to see in the annual report and on our website. We aim to be fully transparent in everything we do. Just standing back, if we take our performance across all of our commitments together, we've again been awarded a AAA rating, ESG rating by MSCI. The 2nd year on the trot we've been given such an award. Firstly on environmental then, which covers at least three of our commitments, which are shown here on the top. How are we getting on? Well, we maintained our A CDP leadership score for the 3rd year running, which really is no mean feat.
Our 2022 data, independently audited, shows us having reduced our Scope 1, Scope 2 and operational Scope 3 emissions by 4% in the year. This reduction despite the increased level of activity in the year, and a reduction of 40% versus our 2019 baseline. This leaves us on track with our accredited science-based target pathway to hit operational net zero by 2030, which is a target I've previously spoken about before. As a reminder, this operational net zero target only includes our Scope 1, Scope 2 and operational Scope 3 emissions. As operational Scope 3 emissions only account for a small proportion of our total indirect emissions, this 2030 target should really only be seen as reaching first base.
What we've done now is we've gone further and extended our target to include total emissions, the whole of our Scope 3. As you can see here on the second bullet point on this slide, what is now included in this is a much, much wider definition of emissions. What we're saying now is this, that we're targeting 2045 to be net zero in our total emissions. Everything. The whole supply chain, the raw materials we use, and the future operation of the buildings we build. That's everything. As we did with our 2030 operational target, we're currently going through a full revalidation process with the Science Based Targets initiative for this new target, and this will give our plans real substance and validity.
Just standing back from all this, although we're making good progress on carbon emissions, I think it's fair to say that the last few years have been the early years, have been the easier years, the easier wins. The really hard yards on this are still ahead of us. The message is so far so good and we're well on track. Then just finally on environmental. It's not just about carbon emissions and net zero targets. There's lots more important stuff going on here. Waste, biodiversity in particular, all important to us as a business and all important to us as a society. Then just on the social side, well, there's sort of two aspects to this. There's the internal and there's the external.
Looking externally, social value is a prominent factor in our bids, particularly with the public sector, with clients asking more and more, "What else do you bring to the party?" Delivering social value is therefore a work winner for us. It's a business imperative, as well as being the right thing for us to do as an organization. As you'll appreciate therefore, activities in this area are numerous, widespread and well embedded across the group and are being delivered locally down at an individual project level. The internal aspect to social value is about making our own business better, and there's a number of facets to this also. I've spoken already about our supply chain. Very important to us, not least paying them on time. Payment practice is the slide at the back of your packs.
Looking after our own people is another facet. On this, health and safety stats are a very established, clear, and tangible set of measures. Now, we've done better on this one this year with our reportable accidents reducing last year after a bad year in 2021. Obviously, this is one area which requires a never-ending continuous focus. In terms of making our business better, diversity of minds in all its forms, and inclusivity in particular, are also business critical. We don't shy away from what are, on the face of it, quite poor headline diversity stats, which you can see on the slide in the box. We've still got a long way to go here. What hopefully this does, though, is just gives you a snapshot. It's a wide-ranging area here.
ESG is important to us. We aim to be open and transparent, what we're good at, what we're not so good at. Open and transparent in what we do, how we do it, and what we're trying to achieve. As I just mentioned, you'll be able to see a full suite of our ESG KPIs in the annual report later in March when it's published. I've covered the past, the numbers, the operations, and ESG. Now John will tell you about the market and the future outlook.
Thanks, Steve. If I could start by just looking at the market backdrop as a whole. On the whole, the markets that we're operating in are pretty stable. Probably 2 exceptions. 1, a strong market for Fit Out and the housing for sale part of our affordable housing business, which is very weak. Clearly, you know, that will have an impact on profits for our affordable housing business. There are early signs, and perhaps not so early, that inflation has peaked. Since, certainly since the beginning of this year, each week seems to have got a little bit better where things are stabilizing, particularly with labor and subcontracting prices, and also particularly in the early trades like ground workers. I think it's helped by the fact that house building activity is slowing down.
We're also finding that we can get hold of supplies much more easily. As we know, the brick makers are beginning to have their stocks of bricks again. We hope that these early signs will continue through the year. The thing that probably keeps me awake most at night is risk of financial failure in the supply chain. I mean, clearly, our balance sheet's very important, but it's also important for us to know what the balance sheets of the companies in our supply chain are like, and also who else are they working for. That probably is the big risk in the market for us at the moment. If I take the businesses one by one, the construction market is pretty good at the moment.
As Steve said, our particular preferred bidder is up 40% on this time last year. Our order book is down 1%. We do have a situation where quite a lot of smaller contractors or contractors with weaker balance sheets are going out of business, and that is a threat to the supply chain, and we're having to watch that very carefully. Balance sheet strength for construction is probably as important as in many of our businesses, both with our clients and our supply chain. Our strategy here is broadly very similar to all of our other businesses, where it's all about organic growth, and it's just making our businesses better and better the whole time for all the stakeholders.
We're looking to expand construction in those areas where we have lower market share, particularly in the Northeast and other parts of the Southeast. Again, it's all about long-term work streams. How can we either be on more and more frameworks or have work for clients which is repeatable the whole time? We can't go out into the marketplace all the time looking for new customers and expect to have a good business. Our medium term target here is unchanged, 2.5%-3% a year, and a revenue target of GBP 1 billion. As we said before, it is always the margin target that is the most important. We do expect good growth towards that GBP million to GBP billion turnover this year.
Infrastructure, there's a lot of political support for infrastructure. It's a very steady market at the moment. There's a lot of bidding activity happening. Very often these jobs, because they tend to be bigger and longer term, takes longer from winning a contract to getting on site. We're in a position where we've got good visibility of what we need this year, but we're sort of looking for work for next year onwards. The sectors that we are concentrating on are unchanged. It's highways, rail, nuclear, energy and water. It's absolutely fundamental in this business that the work comes through frameworks, and we're about 90% through frameworks. I think one area where we're different from our clients are we actually don't want to work in JVs unless there's a very, very, very good reason for it.
Very often, the government in particular wants JVs because they've got joint and several guarantees then from the contractors involved. We're saying, "Right, we've got the balance sheet for you to work with, and we don't think JVs are the best way of operating because who do you talk to? Whereas they're almost like an investment in another company. Also, when our people go into the JVs, it sort of dilutes our culture. We would much rather not be in JVs but work on our own. Plus, history tells us we've made less money in JVs, which is another very good reason. Here again, you know, our medium-term target is a margin of 3.5%-4%, and we expect to be in that range this year with progress towards GBP 1 billion turnover.
Fit Out market, I'd like to spend a bit of time on because I think a lot of people are saying, "Well, hang on, nobody goes to work anymore. How come you've got a Fit Out business that's doing okay?" There's no doubt that there will be less square footages used for offices. It'll be the weaker buildings that will stop becoming offices, and these tend to be the buildings that we don't work in anyway. For the rest, we think people are going to spend more money fitting the buildings out, not less, and that is actually a long-term trend over the last 30 years, where the cost of fit out has increased as a percentage of the total cost of the building. We now have jobs where the cost of the fit out is more than the cost of building the building in the first place.
The other thing that's changing is fit outs used to change perhaps every 10 or 12 years. It's now more like every 7 or 8 years. We think the market conditions in fit out are really good, which may sound really surprising. There's also very strong demand by lease renewals. A lot of the old sort of 30-year leases are coming up, that is really then a big refurb required. Obviously, people are changing their offices for the new way of working. Offices have now got to be really good to attract people into them, but rather than people working from home. When refurbs do happen, they have to be much more energy efficient, which again, puts up the cost and therefore our market size. As far as strategy, we must not take our market share for granted. Complacency is a real problem.
We're gonna have to continue to work harder and harder and harder to continue our focus on really giving those clients a brilliant experience. We can never compromise on quality of delivery. We have to be much better than everybody else to deserve our market position. This is a business where we have to work really hard to maintain where we are. This is the only business this time round that we've increased our medium-term target, and that is from 40-45 to 45-50 throughout the cycle. We expect 2023 to be slightly ahead of the that range and pretty similar to 2022. Property Services. I guess if we had a business that I was not so happy about this year, it's probably Property Services.
The market though is very strong, and the local authority clients and the housing associations are really homing in now on the maintenance. We've all read about the damp and things like this. It's really come to the top of everybody's agenda, and it's not just price. This is a very stable market with long-term work streams. We like the contracts which are 8, 9, 10 years, which are also then renewable for longer time, because it does take time to set a contract up and get it running properly. Also, we gotta continue to offer much more social value because there's a lot more that we can do than just the straight building work. Here we have a medium-term target profit towards GBP 15 million a year, and we expect to make significant progress.
Now, one of the things Steve talked about was inflation hitting us this year. Most of our contracts on the first or beginning of April have a 10.1% uplift, that will make a big difference to our profit from April onwards. Partnership Housing. There's a strong pipeline of new mixed tenure schemes, we are really excited about those. There's also a very good market for contracting work. A lot of the competitors for the contracting work tend to be smaller contractors, as the jobs are getting, one, bigger, and two, the housing associations and local authorities are more concerned about balance sheets, we're winning much more of this work at decent margins. Now, the downside in Partnership Housing, which is not surprising, is the housing for sale. You know, October, November, December were very weak.
January, February has got a little bit better, it's still only about half the sales that we were doing this time last year. It's very difficult to predict what is gonna happen, we assume that it's not going to improve if anything, this year. It's our strategy here is to increase not just the number of mixed tenure schemes we have, but also the size. We want bigger jobs that last longer, and we're also looking at geographical expansion. There are a few areas where we're not strong, like the East Midlands and the Northeast. It's fundamental for us to continue to invest in this business, even though it looks it's gonna have weaker profits this year because this is a fundamental business for us for the medium to long term.
I've said before, we see it being one of the real major, if not the major driver of profits. The medium-term target is an operating margin of 8% and rocky towards 25%, but that is going to be reduced this year. There is no change to our strategy or our medium-term targets. Urban Regeneration. There's strong government support for mixed use Urban Regeneration. There's some really good prospects for us in winning big long-term work, which should increase the size of our order book quite dramatically over the next year or two. There's a lot of bidding activity at the moment, and we are well-placed for these big mixed use developments. We've got really good track record, and the jobs that are coming out are just right for us.
Our strategy here is to have bigger jobs and longer jobs and where it's mixed use, so right in our sweet spot. We are going to grow our presence in the Midlands, on the back of Arden Cross, which is a very big win for us, and we've got two or three other schemes there which we feel we have a pretty good chance of winning. This is a business where, again now, we want to have greater selectivity so that we can improve our ROCE. Our medium term target remains a three-year average ROCE up towards 20%. On a one-year basis, we did it last year, and looking forward to 2023, we expect a similar performance, a similar ROCE on a similar capital employed.
If that would give us 2 years of 20%, we're actually making progress towards our 3-year rolling ROCE. This slide, I think, is a very useful slide. I'm not going to go through it in detail, but it actually just has on one slide our medium-term targets, what we actually did in 2022, and what the 2023 outlook is like. I don't want you to think, and I know you don't think that the medium-term targets are the limit of our ambition. As you know, we've been upgrading them as we go, even though we've only got one that we've upgraded this time, which is Fit Out. You know, our strategy is very much building on these businesses and then improving those medium-term targets as we can.
If I summarize, look, the markets we're in are generally favorable, except housing for sale as part of affordable housing. Keeping that strong balance sheet and holding significant cash at all times is a fundamental part of our strategy. We need that to focus on long-term work streams. It's really understandable, if people want to sign up to us for 20, 30 years, they want to know, one, we've got the cash to still be around, and we've got the cash to invest in their schemes. Everything we do now is investing in the organic growth of our businesses. You know, we're not looking for acquisitions, we're just growing our business, which is all have a long way to go. We've increased the medium-term target for Fit Out and the strong growth potential remains for Partnership Housing.
It all means that 2023, we expect the group profit to be in line with our current expectations. Thank you. Any questions?
Hi. Morning, guys. It's Alan from HSBC. I've got a couple, please. Just on the supply side of things, is there any significant concentration with a particular supplier? If cost volatility is reduced, isn't the market becoming more stable for them?
I think it's a little early to say that the market is stable, but it does appear more stable, and it would appear that it's going to become more stable.
No particular concentration?
No, the answer to the first one, because we've got, you know, these divisions all operating in different markets, predominantly regional businesses, decentralized structure. We don't have any group reliance on a top 10 suppliers that causes a concern. You know, it's very much local level, local supply, project by project. Each project is very vigilant. It has to be vigilant, but on a sort of a group piece, it's not a mega risk.
Just on the ESG point, the move to total emissions, are you guys the only people doing that? Because presumably as a calling card for public sector customers, that makes you quite different and quite exciting for them.
I don't, I don't know. I think what we've tried to be is very open, very honest and transparent with what it actually means, and to be perfectly frank, 2045 total emissions, how are we gonna get there? That's a hell of a challenge, and I don't have all the answers by any stretch of the imagination. It shows that we're sort of going through the process, we're going through the validation of our plans, et cetera, and we're serious about getting there. As I mentioned also that the first couple of years, you know, last few years have been the easy wins. You know, we made some great progress, but let's be frank, it's been the sort of the low hanging fruit.
It's gonna be really tough when you look at the sort of what total emissions, what's incorporated in the whole supply chain, like everything. It shows an ambition, it shows a desire, and we have to do it, and we want to do it.
Our customers, a lot of our customers want to do it as well.
Yeah.
Lastly, if I can on Partnership Housing, can you talk about the levers you have in the business to sort of manage at a slower rate? Sorry, just to be clear, for 2023, you're assuming January, February kind of sales rates and no improvement in the sort of guidance or numbers that you're thinking about?
I think it's more not the first week in January, but it's more sort of later January, early February. You know, we are looking for an improvement, but not back to, you know, normal levels by any stretch of the imagination.
Just the levers, is it just slowing completions, slowing completions to sales rates, trying to move towards more PRS, et cetera?
Interestingly, our footfall is not dissimilar to last year, but we are selling, i.e., people, the number of viewings is about the same, but our sales are well down.
Well, there's all sorts of things we can be doing, looking at, 'cause they're, you know, mixed tenure by definition is mixed tenure, there's all different aspects you can do. Fundamentally, you will always have an element of open market sales. You know, I think what we're trying to sort of say is that on one of the sides, we've got the contracting piece for housing associations or anything, we're just cracking on with that. We're cracking on. In part sometimes you don't have the absolute flexibility to be able to stop work, and sometimes you don't want to, because we're sort of medium long-term.
What we don't wanna do is make short-term knee-jerk reactions, which might actually save your sales a few bob this year, but it's gonna jeopardize the sort of strategic growth plans for next year, et cetera, et cetera. We're just cracking on. You know, obviously aware and doing what we can in terms of adjusting build to sales pace, et cetera. You know, I think the, one of the important messages are we are medium long-termists in here. You know, this is not just a sort of a short-term 2023 bam and make those decisions, 'cause it will prejudice the benefit in the long term.
Andrew, nice to see ya. Peel Hunt. A couple of questions as well, please. First of all, in terms of the Fit Out business, can you just give us a little bit of insight what's sitting in preferred bidder, what's been tendered, whether that's in terms of larger projects, growing value? Secondly, in terms of taking the supply chain with you, volumes are obviously up 22% last year. How can you make sure you've still got the supply chain with you to make sure that you can deliver the projects as you would expect? I've got one on Partnership Housing, but if we do Fit Out first.
Look, I think the key thing, you must remember that our average fit-out job is still only about GBP 3 or 4 million. I don't think in the preferred bidders bit, we have anything of any scale. I think it's mainly, you know, maybe sort of a few GBP 10 or 15 million jobs, but nothing, no one is significant. Supply chain's a real issue, actually, we've got to be careful that we deliver these jobs really, really, really well. We can't stretch our supply chain too much. We are bringing in some new people bit by bit, just to try and expand it a little bit as we're growing.
Thanks. Just one on Partnership Housing. In terms of the houses that are for sale, first of all, how can you make sure you can control the pricing on those? Is it down to someone on site, or does it come back to you guys? Secondly, some reassurance around the quality of those assets, 'cause in the dim and distant past when you have had previous problems with Partnership Housing, they were the wrong houses in the wrong place. Any comfort or color you can give us?
What a memory that is, Andrew. Blimey.
Great.
I think there's a couple of things. We have learnt. I don't think we've got any of that at the moment. Another thing to remember is that If things, when we look at the statistics of how many we're selling a week, which is pretty similar to the house builders on the whole, but we've got a big variety. Some sites are selling really, really well and prices are still rising. Other sites, prices either not selling well and we're having to adjust the price, and there's a whole load in the middle where perhaps we're having to give some more incentives. This is definitely something, decisions that are made not on the site, but in the, in the local regions. It's no one size fits all.
Thanks.
Morning. Jonny Coubrough at Numis. Thanks for taking my questions. Could I ask firstly on Partnership Housing, and it's been part of the strategy to increase the size of sites, and we've seen that happen quite meaningfully. Now at 160 open market units per site, it appears to be getting into a kind of sweet spot. How much further do you think that could go? Also, could you give us an idea of the range of site sizes? Perhaps that feeds in with what you were saying, John, around sales rates.
Yeah. We'd expect that to grow over the next few years, possibly another 100. Sometimes when we talk about site sizes, we may actually have a series of sites with the same customer or the same partner. you know, with say Suffolk, for instance, we're talking nearly 3,000 houses. Anything below sort of 60 or 70 houses would be a legacy from the past.
Thanks very much. On infrastructure as well, you said again, you try to avoid JVs where possible. I think you're working in JV on Lower Thames Crossing. Is that because there's a pipeline opportunity there? Could that be something much more meaningful in future?
I don't know the answer to that one. Sorry.
No. I think, what, if I sort of worm my way out of that one, it'll be, you know, there's, it's our preference to avoid JVs. Put it like that.
Sure. Then just last one on fit-out. I mean, there have been a few questions, but just keen to hear if there's been any big change in the profile of competitors in the market?
No. We have one big competitor, and that's ISG. There's three or four competitors who would be fighting for third position who would be significantly smaller.
Thanks.
Behind you.
Oh, hang on. Hi there, chap.
Hi
Aynsley Lammin, Investec. Just that point on infrastructure, not trying to nail you down on it, but in terms of JVs, you know, you're trying to fill the order book for next year, do you have a view on what sort of level of potential work you're bidding for is in JVs and how that dynamic's changed in the market over the last couple of years and whether you see it continuing in that direction and then also sort of the implications on margins for yourselves?
I don't think we're bidding anything in JV at the moment. Doesn't mean we won't, but there has to be a really good reason to do it.
How much of the market do you think roughly you're sort of ruling yourself out of by not participating?
Well, I don't think we are because there are certain clients that we had to work in the JV with before that we're now working on our own with.
I think just to be sort of clear here, I'm pretty sure John indicated a preference and the sort of the facts, if you look at our sort of history, the facts are the JVs our experience is that we've sometimes struggled to get embedded cultures, our own processes involved in JVs. You know, that tells us therefore that where situations where we can avoid it, we will do. We'll look to do it on our own. Inevitably, there's gonna be situations where you're gonna have to. We're certainly not ruling jobs out. They're saying, "No, no, we're not doing that," at all.
It's our strong preference where possible, whereas historically it might have been the default position, oh, we always do it in JVs 'cause that's the way you do it, to try and sort of as if in the first instance that, you know, this is something which we should be doing on our own.
Thanks.
I'm not, definitely not striking out half the market at all. No, no.
Alex O'Hanlon, Liberum. Just a couple of questions from me. Firstly, on Construction & Infrastructure, am I right in thinking that we've met the medium-term target this year, expect to do it next year, and exceeded them last year? What will it take to kind of see those upgraded, noting as well that inflation is peaking now, so the kind of the backdrop should be getting easier?
Shall I take that one?
Yep. Do.
You're talking specifically about the margin target here.
Yeah, the margin targets.
What we've said, the margin target is, as you said, it's a range.
Yeah.
What we don't wanna do is keep pushing those margin targets up and up and up and up, because that means if you're pushing the margin, you're taking on more risk. You might win it one year, and you might win it another year, but you'll drop the ball at some shape. We're happy operating in that range. It's the right level of risk for us. It's the right level of delivery for us. Now we've got a consistent operating platform where we feel confident we can do that year in, year out. Yeah, we might be a bit up a bit one year, down a bit slightly, but we're gonna be in that range. Now we're focusing on growing the top line, so hence we introduced the GBP 1 billion revenue. Again, it's not about chasing revenue here, though. The margin target is sacrosanct.
That's sort of written in stone. The margin then sort of comes on top. We really don't wanna keep pushing that margin higher and higher and higher because you will take on more risk.
Thank you for that. One other question on capital allocation policy. The dividend cover was towards the top end of the range this year, I think 2.4 times, and the policy indicates 2-2.5 times. Would you consider kind of coming down towards the bottom end of the range, or is kind of the focus and the thought process to kind of keep investing in the regeneration businesses as a first priority before distributing additional capital to shareholders?
I think the thought is giving the whole range, so it gives the ability to increase the dividend even if profit doesn't go up a great deal.
Thank you.
Thanks. Hi, Stephen Rawlinson. Just a couple from me, if I may. Just the first one is in and around Construction & Infrastructure, where both of which you say you get to about GBP 1 billion revenue this year. We're six or seven weeks in already. I mean, you know, you're talking about 25%-30% increases-
Sorry, no.
Not this year.
Not this year.
Okay.
I said progress towards.
That's medium, that's medium-term target.
Progress towards getting revenue next year. Just on this whole issue, I mean, you the wording is a bit ambiguous there for me anyway. Notwithstanding that, and I get your point a whole answer. To what extent is that a volume increase? To what extent is it gonna be price increases? Just adding into that, to what extent can the customer tolerate the sort of inflation that's been going through? It's gotta come through in water bills. It's gotta come through in some form of taxation at some point. Is there an observation you're able to make in and around that on the old conversations that you're having with the water companies and around, you know, the tolerance that consumers may have?
Well, there's no doubt that, you know, some of our clients have a certain budget, and it may be rather than building 5 schools, they'll only build 4 schools.
Basically, they'll adjust their volumes is your, is your point.
Yes.
Okay.
We are saying that our volumes are looking okay.
Okay.
Not, neither of them will do GBP 1 billion this year.
Yeah, sorry, it says positive progress in 2023.
Yes.
It's misread.
Good.
Second question on Property Services, I mean, continually you talk about the GBP 15 million, if we look at the sorts of margins that are being made elsewhere, the implication of that is GBP 250 million-GBP 300 million of revenue. You yourself have said that you're disappointed. I know it's probably, you know, it's only 7% or 8% of the total level of activity when you reach these targets, but just set me right on whether this is a realistic level, given what we see in the marketplace generally and observing, you know, others in this marketplace. Just set me right on that, why it's still at that level?
No, well, we believe we can get there, but we haven't got there. We also believe that this, the business can improve operationally. It's a bit like our Fit Out business. It took us nearly 20 years to get a decent margin out of it. I hope it won't take that long, but we're making progress. As I said, we're not pleased with what it did last year.
That. Thanks, John. Just a final one. If you may ask about the ESG, but also your comments about the financial viability of the subcontractor network. It raises a lot, obviously, lots of issues about their ability to afford the some of the Scope 3 targets that you've put in place. That obviously comes down to you agreeing with your customers prices which are adequate for your subcontractor network to pay for the additional costs of, you know, I don't know, a hydrogen-driven tractor digger loader, but that's sort of detail that we shouldn't be going to.
The point was more to do with, you know, are your customers willing to pay the subcontractors for the Scope 3 requirements to which you've pointed towards, which obviously will have to come, you know, in the next 3-5 years?
Steve, that's the big question. You know, the full Scope 3 in the supply chain, step 1 is getting full visibility of what we're talking about. You know, this is, this is not just a, "Oh yeah, we've got the route map. We can do that dead easy. Know where we're going." There's a lot of unknowns at the moment, step 1 in the jigsaw is working out precisely what we're talking about and is getting a grip on the... You know, we can do our operational Scope 3, we can do our own dead easy, get that, you know, separately audited. Having full visibility and measurement of what is in the supply chain is step 1. It's... I have to say, don't know is the, is the short answer. It's work in progress and it's something to work on.
We just feel that the whole movement is going towards this, and the whole country is gonna feel very differently about it, and we just wanna be on the front foot.
It's early days to be able to say our clients are willing to pay for this. It is too early to tell.
Have you been able to scope out what activities you might go into yourself that are currently subcontracted in order to achieve these requirements?
It's work in progress. You know, it'd be wrong of me to sort of say, "Yeah, we've got a sort of firm plan. We know precisely the route map." Can't tell you that. It'd be disingenuous. Don't know. It's about sort of starting to get visibility and understand and work through it. It's a big task. It's a hell of a task.
Don't forget, the bigger, more sophisticated members of our supply chain have really taken this on board themselves. Brilliant. Any other questions? Thank you very much indeed.
Thank you.