Cemex SAB de CV (CX) 2004 Q2 法說會逐字稿

Well, good morning, ladies and gentlemen, and a warm welcome to our Interim 2004 results presentation. I also welcome those who are joining us this morning, using the dial-in facility.

Alongside me is David Munro, our newish Chief Executive, and Adrian Auer, the Group's Finance Director. With us are RMC's managing directors, who took up their positions when we implemented our organization and managing changes on July 1.

We have Dr Gerard Letourneau, whose responsibilities include our Materials operations in Southern Europe, and Gerard is also a member of the Board. Stephan Brock who is responsible for our Material operations in Central Europe, including Germany, and Del Tanner who heads our Material operations in the Americas. And also Jim Brooks, who heads our newly formed Cement division. David Walkerdine, our new Head of Corporate Development, who also has operational responsibilities for Dubai and Malaysia, is also in attendance.

Now, as to the agenda this morning, David will speak first, and Adrian will then take you through the financial and operating details of the results. David will then make a few concluding remarks, before the Managing Directors join us to answer your questions.

But before David takes the floor, I just want to make a few comments about the Group. RMC is sustaining its earnings momentum during a continuing period of change, and we're expecting to deliver a satisfactory outcome for the year as a whole.

David Munro as our new Chief Executive is providing strong strategic and operational leadership for the Group, and this, together with the quality of the management team being assembled, gives myself and the Board considerable confidence for the future.

And finally, just a note for those of you planning to get to the Heywood Williams results meeting, I will ensure that you have adequate time to get there. So now let me hand over to David.

Okay, well thank you, John, and good morning, ladies and gentlemen. As John said, my presentation this morning will be in 3 parts. Firstly some comments on our results for the first half of the year, then giving a short update on our cost reduction on our German restructuring programs, and then I'll move on to what will be really the main part of what I have to say, which is the promised progress report on our strategic review.

Let's start first with the performance for the period just ended. We were very pleased that these results showed up a number of very encouraging trends. Our German business continues to recover, in line with a gradual improvement in pricing conditions, and as a result of the actions that we're taking to restructure the business.

Elsewhere in Continental Europe, there were improved performances, particularly in France, in Poland and in Austria. And perhaps the star of this show, in the United States, we benefited from the continuing strength of the housing market, the recovery in the commercial sector and the general strength of the economy, but also, from the cost reduction and business improvement initiatives of the last 18 months.

However, in Great Britain, where we've been undertaking a complex and demanding reorganization of our Aggregates and Concrete businesses, and against the background of weaker market conditions, performance was disappointing. In the coming months, our priority will be to stabilize, and then to start to recover Readymix margins, all the while protecting our existing market share, which is around 24%.

In Cement in the UK, we were unhappy to have to report in our June trading statement that the Rugby plant had suffered a number of stoppages in the spring, which, as we said in the trading statement, were raw materials related, not fundamentally technical, but nonetheless disappointing. I am happy to say that since then, production has stabilized, and in July and August, it was over 100,000 tons a month, which is where we'd like to see Rugby producing, and that leads us to be hopeful of a better second half.

Now, the good news, taking all this together, is that in spite of these setbacks, overall, the positives for the half year far outweigh the negatives, with profit before tax up by more than £12m, to nearly £63m. And on a continuing basis, EBITA was up £21m to over £103m.

And moving on to our cost reduction and German restructuring programs, at our AGM in April, we confirmed, that having put our balance sheet in order, maintaining the momentum of earnings recovery was a key priority for the Group. As you are aware, 2 crucial elements in this are our cost reduction and our German restructuring programs, details of which we gave you in March.

I am happy to say that so far this year, further progress has been made on both fronts. In Great Britain, the amalgamation of the Aggregates and the Concrete business, to form UK Materials, is now completed. This will deliver, by the end of 2005, £21m out of the £50m that we targeted in our Group cost savings program.

In the United States, the rationalization of the business continued, with the 2 subsidiaries in central Florida combining at a single office location, and a range of operational improvements implemented in the Carolinas and in Georgia.

And importantly, in Germany, we have further advanced the reorganization, by combining our East, the old East, and the West Cement divisions into one organization, and removing a whole level of senior management. Plans for the closure of the Mersmann clinker plant in Western Germany are being finalized, and again importantly, we've concluded some significant commercial agreements with other major cement suppliers that will enable the parties to significantly reduce logistics costs.

In addition, as part of the ongoing program, we've withdrawn from a further 8 concrete plants in Germany, and we have some more closures planned during the rest of the year, where performance or outlook doesn't support continued operation.

We will provide further details of our progress on both these programs when we release our preliminary results next February, but in summary, both are on track to deliver the benefits that we've planned.

So turning to strategy, at our AGM in April, we identified the need to develop a clearer picture of RMC's future direction. We said that this would involve an evaluation of the prospects and the growth operations for each of our businesses, and that we'd explore how our international network of operations and people can generate more than the value of the apparent sum of its parts.

As promised, let me give you a progress report, and I would emphasize a progress report, on this work. Central to the strategic work that we're now undertaking is to establish a solid platform for cultural change within the organization, which builds on the strengths and opportunities that we see in the business. The management and organization changes, some of which we announced in June, have an important role to play. If you recall, we established a stand-alone cement organization which reflects the global nature of the Cement business.

Unlike Cement, our Aggregates, Concrete and Building Product businesses are essentially local, but with real opportunities for sharing of resources and best practice. So there, we've retained a geographic organization for these products, but importantly again, we've given each of our 4 regions a seat at the highest decision-making forums, and the gentlemen you'll meet a little later are involved in that.

Now, a number of key objectives were met by this reorganization. Firstly, having the managing directors of the Cement business in the 4 regions report directly to the Chief Executive has established clear accountability and clarified reporting lines within the business.

Secondly, through recruiting and redeploying internal resources, we're working hard to rebuild our managerial, analytical and deal-making capability, which was reduced over the last few years, and lastly, by encouraging joint projects, we're taking steps to accelerate the transfer of best practice across the Group.

Our new structure will deliver important synergies in the areas of operating, and marketing best practice, as well as helping us select the most promising business development opportunities.

I would emphasize we will not attempt to define our product and service offering centrally. We operate mostly in local businesses, but we have begun working on some tools for local managements, to help them to better analyze their businesses, and to come to better local decisions.

Moving on from organization to our products, specifically, in-depth business reviews are well underway, which will lay the foundation for the Group's integrated business strategy for the next few years. Although we are not complete, that process has really already given us some key points to work on in strategic re-positioning of the Group, as a balanced player in the heavy end of the Building Materials sector.

Cement and Aggregates are upstream businesses, where competitive advantage is sustainable, by virtue of scarce resources, scale, and technical expertise. We regard both as core products of RMC, and we'll seek to develop them accordingly.

We've identified 3 clear ways in which Concrete is important to us. Firstly, as an attractive stand-alone business, in circumstances where competitive advantage can be maintained. Secondly, it's a route to market for our existing upstream products, and third, it provides a platform to support selective new investments in Cement and Aggregates.

Now, the importance of each of these roles will obviously differ from location to location, but we believe that for these reasons, Concrete is fundamental to our future, and is seen as our third core product.

Today, our spread of investments in these products across 22 countries gives us the benefits of a diverse portfolio, matched only by much larger companies in the sector, and does constitute a solid base for us to build on for the future.

Moving then to Cement, in particular, in comparison to our other studies, the Cement review is the most advanced, and this is the area where I'll concentrate today.

A little history - RMC's involvement with Cement goes right back to the late '60s, when it bought the Beckham plant in Germany. Developments thereafter were into Eastern Germany in 1990, the US acquisition in '94, the initial Polish and Croatian acquisitions in '97, and then the Rugby acquisition in the year 2000, which gave us our Cement assets in Great Britain, and further expanded our position in Poland.

Today, we have over 10 million tons of clinker capacity, and almost 16 million tons of cement, spread over 7 countries. As well as these producing assets, we also have 20 import terminals, primarily located in Great Britain and in Scandinavia.

If we look at how the Cement business fits with our Concrete businesses on a global scale, last year, we sold just under 16 million tons, while we consumed almost the same amount, which makes us the world's largest cement user. However, in some markets, we run substantial surpluses, which can create an exposure, while in others, our short position represents both an opportunity, but also a threat.

In the past, acting as a conventional cementer in the UK, and integrated business in Germany, an importer in Scandinavia, and a major customer in France, it's hardly surprising that we've been unable to make the most of our overall cement position in the face of competitors who take a global view.

So, to provide the necessary global focus, we've put all our cement assets together into a single business, and I just want to share with you some of the high level objectives which we see for our new management team in Cement.

Firstly, we look to them to make the business more congruent with the dynamics of the global Cement industry. As a small player in the Cement world, it will pay us to fit in better with the specialist companies who dominate the sector today.

Secondly, we'd like them to move the business towards a better geographic alignment between our Cement and our Concrete outlets. In the UK and in California, we're well balanced, whereas in Europe and in the Eastern United States, we have major long and short positions, which have proved difficult to manage from time to time. We'd like to find ways to move to a more balanced portfolio across the whole business.

The third objective we've given them is to restructure our Cement assets, for improved financial performance. And lastly, we'd like them to generate opportunities for us to deploy capital for growth.

Looking at the financial performance for the Cement business, we achieved an EBITA last year of £40m, and an EBITDA of just over £80m. The return on net assets of 3.4% was a reflection of the poor returns that were achieved in the UK, in Germany and in Poland.

Now, this is clearly unsatisfactory, and in tackling this problem, the new Cement management must look at a number of immediate issues. In Great Britain, the need to improve reliability at Rugby, and reduce the cost base, in Germany, increasing prices, and reducing our capacity to a level consistent with a more stable and viable market, and seeing through the reorganization which still remains to be done in the business, and in the United States, how to effectively respond to cement shortages of recent times.

I think the potential for improvement in our Cement portfolio is obvious, and I'm confident that by February, we'll have identified how to make the most of our investments in Cement.

In contrast to the Cement review, our work on Aggregates is still at an early stage. Looking across the Group, we are particularly strong in the United Kingdom, in California, in France, and in Austria, with important supporting positions across the rest of the business. Opportunities to grow in Aggregates in the United States are clear, although high asset prices reflect the level of competition for these resources.

Across Continental Europe, consolidation is patchy, and targets must be carefully selected to benefit from anticipated changes in market structure. Inevitably, a rigorous selection process will be a key component of our future approach, and our concrete positions in potential growth areas will support us in this.

And moving on to our third core product, Concrete, our study has so far shown us 3 distinct ways in which our Readymix network, our reputation and our skills can add value to the Company. Firstly, as a business in its own right in circumstances where we can create a sustainable advantage by virtue of defendable locations, unique product and service offerings, or cost advantages.

And particularly in consolidated Building Materials markets, our hard-won and substantial Concrete market shares give us considerable scope for achieving better results by reconfiguring the scale and the location of our plants.

Secondly, Concrete has an important role as a route to market for our Cement and our Aggregates, where our own Concrete plants provide secure outlets, and also support rational pricing behavior in the upstream products, and thirdly, as a platform to support potential new investments in Cement and Aggregates. Having and continuing to build our Concrete network in attractive markets before they consolidate, enhances our ability to make new investments in Cement and Aggregates, as local business environments become attractive.

Our Concrete coverage gives us good understanding and leverage, and can support us in landing the best upstream opportunities. We will be looking very carefully at our Concrete portfolio as we develop this template, and we will shape our Concrete strategy accordingly.

In terms of other products, we will also review the opportunities in products which are adjacent to our core businesses, such as mortar, asphalt, and pre-cast concrete. There, the challenge is to properly understand their interaction with our core products, and based on this analysis, take decisions about where we should invest for growth, and where we should downsize or withdraw. Again, I'd emphasize that this work is still at an early stage.

More generally, I'd just say that our review so far has revealed many more choices than perhaps we first assumed when we set off. Our asset distribution and our skills base gives us access to a wider range of products and geographic opportunities than most companies of our size.

The new management and organization structures, the various change programs running across the business and our engagement of a wide range of people during these business reviews, are all fundamentally changing the way people are thinking about RMC. Most see the positive potential, and are enthusiastic supporters.

In what is a very geographically diverse business - we operate in more than 2,000 locations in 22 countries - the communications challenge is considerable, but we are making real progress.

And as we bed down our strategy and start to deliver on our financial targets, by reducing costs and by building margins, our financial firepower will improve. But, we will also need to be creative in our use of such things as options, long-term contracts, alliances and joint ventures, to create the flexibility that we need to make the most of the opportunities which are buried in our portfolio.

So in conclusion, although the hard work has only just started, I'm confident we're on the right track, and that we're building a solid platform for change. In this update, I hope I've succeeded in giving you a feeling for our progress, and enough guidance that you can start to anticipate how the completed picture will look at our results presentation next February.

I'll now hand over to Adrian, who will take you through some of the numbers in more detail, before I come back and wrap up with an outlook.

This stand has been carefully designed for the shorter and the taller here. It's quite useful. Thank you, David, and good morning, everyone. In order to keep this presentation to an acceptable length, I'm not going to be commenting this morning on the detailed performance in every country, so for the countries that I don't mention, which are in the rest of Europe and the rest of the world, you'll find some analysis in the appendix in your packs.

Before going into the detail of our performance in the first half of 2004, I'd like to start by looking at some of the headline numbers from the Profit and Loss account. This slide shows the headline reported numbers, and as you can see, although reported EBITA was down by £3m on last year, if we exclude the discontinued operations of Adelaide, Brighton and Hales from last year, there was an underlying EBITA increase of £21m, and with the lower goodwill and net interest charges, profit before tax, excluding exceptional items, rose by £12m to almost £63m.

This slide provides a high level variance analysis of the PBT increase of £12m. You can see that last year, PBT would have been £1m lower at this year's exchange rates, and the disposals reduced EBITA by £24m. This was offset by reduced goodwill and lower interest, totaling £14m, and an increase in EBITA from continuing operations, of £23m.

This next slide shows the adjustments required to move from reported EBITA to underlying EBITA, and this involves stripping out profits from discontinued operations in the Property division and translating last year's figures to this year's exchange rates. Making these adjustments is underlying EBITA for the first half of 2004, of £92m, compared with £75m last year.

So, let's go to the detail of the movement in EBITA from continuing operations, and as I review this, I will also talk briefly about the operational performance in each region. So the starting point is that in the first half of 2003, EBITA was £83m. Profits from the rest of Europe increased by £2m, reflecting increased demand in Dubai and where you will recall, we are supplying 2.4 million cubic meters of concrete to the Dubai Airport expansion project.

Losses in Germany fell by £10m. This reflects lower depreciation, the benefits from restructuring, and a gradual recovery in prices. Looking at the markets in Germany, construction demand continues to decline by more than had been forecast, led by the civil engineering sector, and by lower spending by local government. Our domestic sales of cement declined by 4%, with the market falling by 2%. Our concrete sales have fallen by a much greater amount, as you can see, as a result of the decision to withdraw from a number of uneconomic plants.

Turning to prices in Germany, as we previously said, the picture is very complicated. Prices differ from region to region, by product type and by customer segment, and this does make comparisons between companies very confusing. We are clearly seeing a gradual recovery in cement prices, and we're also seeing an improvement in our margins on concrete sales. For our other products, Aggregates and Concrete products, prices were stable.

This slide shows a variance analysis of the improvement in profitability in Germany for the first half of the year, and as you can see, the contribution from pricing movements was £8m, or €12m, and for the full year, we continue to expect an improvement of at least €30m from pricing alone. That's £20m.

If we go back to the EBITA analysis, profits in the rest of the world increased by nearly £11m. This reflected improved performance in France, where demand was better than expected, particularly favorable weather conditions at the start of the year in Poland, and in Austria, where concrete prices rose, we also benefited from a reorganization of the business.

Performance in Ireland has been affected by weaker margins, and finally, we benefited from a profit on the disposal of a number of concrete plants in Spain which contributed about £5.5m. As I've already said, you can find details on a country-by-country basis in the appendix in your handout.

Turning to the United States, the favorable conditions that we experienced in the second half of last year continued into this year, and this was due to a strong housing market, the recovery in the commercial sector, and the general strengthening of the economy, all contributed to a £17m improvement in profitability to just under £40m. Cost reduction, and business improvement initiatives, implemented during the last 18 months, also contributed to this improved performance. And this profit improvement was achieved despite the weaker dollar, which had an adverse impact of £3m.

These favorable market conditions were reflected in our sales volumes for the first half of the year. We achieved roughly a 10% increase in the sales of our key products, Concrete and Aggregates, and with the exception of asphalt, the sales of other products also rose.

Turning to the regional operations, adjusting for the weaker dollar this year, profits were up by almost £15m in the Eastern USA, and by more than £5m in the Western USA. In the Carolinas and Georgias, the business continued to benefit from improved market conditions, despite a very wet June. In Florida, which contributed about half the increase in the USA's profits, the housing market was especially strong, particularly in the South West area. And we realized a profit on the sale of a number of Concrete plants in the north of the state.

In the Western USA, in California, we also benefited from a very strong housing market, especially in the Central Valley, with a market buoyed by the volume of public works. In the South West, we benefited again from the strong housing market, particularly in Arizona, and from the expansion of our business into new areas in Nevada. The one weak spot was the asphalt market in Texas.

If we now go back to our EBITA analysis, profits in Great Britain fell by almost £19m, reflecting disappointing performance in both the Cement business and RMC Materials. Looking at volumes, our flat concrete volume was in line with the market, as was our small decline in Aggregate volume. Our Cement volume fell by 4% while the market was flat, reflecting the production problems at Rugby, and our asphalt volume fell sharply, as did the whole market for asphalt.

On prices, we saw satisfactory increases in both Aggregates and Cement. The concrete prices have been affected by the weaker market conditions. As David has already said, the performance of the Cement business has been dominated by a number of stoppages at the Rugby plant during the Spring, and obviously we've been disappointed by these events, but again, I stress that these stoppages were not due to the design or technology of the plant.

As you can see from the graph, production was severely disrupted in April, when it was only about half of last year's level, but again, as David said, it has stabilized since then.

Disruptions like this are costly, for a number of reasons. In order to maintain the certainty of supplies to our customers, we've had to increase purchases of high-cost imported cement and clinker, and we incurred higher logistics costs because stocks were in the wrong place. It just costs a lot more to run a plant when it's suffering stoppages.

Turning to RMC Materials, that's the combined Aggregates and Concrete business in the UK, market conditions were weaker, and this was against the background of the demanding and complex business reorganization that we've recently completed. The relatively flat demand conditions for concrete meant a weak environment for prices, which combined with a change in the mix of sales led to a significant fall in margins.

Demand for asphalt fell by about 10%, principally due to the reduced spending by the Highways Agency. Not only did this reduce profits from asphalt sales, but it also had an impact on aggregate sales, both in terms of volume and mix.

This next slide shows a summary variance analysis of the fall in UK EBITA. As you can see, there was a £6m fall in cement, a £5m fall in aggregates, which includes asphalt, and a £10m fall in concrete. What's not shown on this slide is the £3m adverse increase in pension costs.

Despite the disappointing performance in the UK, taken together, the variances around the world resulted in a £20m increase in EBITA from continuing operations for the first half of 2004, to £103m.

Having covered our operating business, let's briefly turn to the lower part of the P&L account, where I'd like to draw your attention to 2 items. First, the net interest charge fell by £9m, primarily reflecting the lower average net debt. Second, we incurred exceptional charges totaling £17m. These were split pretty evenly between redundancy and other reorganization costs, principally in the UK, and a loss on the disposal of our remaining shares in Adelaide Brighton, and there are notes on that in the detail in your packs.

This slide reconciles opening to closing net borrowings over the first half of the year, showing the different components of cash flow. As you can see, net borrowings at the end of June were £328m lower than for the same period last year. Looking at the cash flow, net capital expenditure was £41m, however, adding back fixed asset sales of £39m gives gross capital expenditure of £81m, which is virtually unchanged from last year.

Disposals generated £136m, almost all of which came from the sale of our remaining shares in Adelaide Brighton, and also the loan repayment ABL made in February. The net result was at the end of June, our gearing level was 55%, compared with 60% a year ago.

I'd now like to turn to earnings per share, tax, and the dividend. Cash EPS was 19.6 pence, and basic earnings per ordinary share, pre-exceptionals, was 15.2 pence. On tax, the underlying tax rate of 22.8% was only slightly higher than last year, and we currently expect a similar rate for the year as a whole. The Board has decided to declare an unchanged interim dividend of 9.4 pence a share.

Now before I finish, I would like to comment briefly on the possibility of year-end asset write-downs. At this stage, I can't give you figures. We still have to do the work, but our focus will be the carrying value of goodwill on the balance sheet, amounting to about £350m, of which £290m relates to the Rugby acquisition. I guess 2 further points. One is that any eventual write-down would of course be treated as a non-cash exceptional item, and now, addressing the more cynical amongst you, I really must stress that any asset write-downs are not part of our plans to improve the Group's financial returns. Of course I didn't really need to say this, because there aren't any cynics here in the room today.

The point I want to make is this. Regardless of any write-downs, the Group remains committed to delivering the EBITA targets it's already established, which were based on current asset values. However, we are determined to further improve earnings growth and the Group's financial returns. These are 2 key objectives of the business strategy reviews, and we will provide guidance on the Group's future approach to financial targets at the preliminary results meeting in February next year, as part of the strategy update. I will now hand you back to David.

Thank you very much, Adrian. Well, let me conclude by just saying a few words about prospects for the rest of the year. Overall, the outlook for the year as a whole remains in line with market expectations, and that's underpinned by a cost reduction program, the progress that we've made in restructuring in Germany, and our lower interest costs.

However, in some countries, the rate of profit improvement in the second half will inevitably slow compared with the second half of 2003. As you will recall, a number of countries benefited from very favorable weather conditions in the autumn of last year, and the spring of this year.

In the UK, trading conditions are expected to remain difficult. Improved performance of the Cement business, as we've said, will depend on continuing stability in production at Rugby. And the continuing strength of the United States' economic recovery will also be a factor. And, as always in this business, prevailing weather conditions will play a part in the final outcome.

Reflecting on the broader prospects for the Group, we are building on the many strengths inherent in our asset portfolio and in our people. We're aiming for change where that will add value, and we will ensure greater accountability within the business for results.

We must be a business with greater responsiveness to changes in markets, and one that routinely makes the best of the opportunities available across its wide span of products and geography. At RMC, a new journey has just begun. We still have a lot of thinking to do, but already, we have a clear sense of the road ahead.

With that, I thank you, and hand you back to John.

Thank you very much, David, and I'd just ask colleagues to come up and take your seats here, so we all can get a good look at you. Good. Well, let's go straight into questions. Let me take the portside first. Ken? Is there a microphone coming, I think? Good. If you'll just say your name and the house from which you come.

Okay, Ken Rumph from Merrill Lynch. A couple of questions, one probably for Adrian, is just to understand whether the disposals on the assets - I'm thinking probably of the US and Spain in particular - are they the property profits that are mentioned or are they in the sort of EBITA underlying that's shown?

Yes, both. First of all, let's give you some guidance on numbers. In the USA, the profits on the disposals in the panhandle in Northern Florida were less than £3m, and that is in trading. In Spain, the sales of the concrete plants, and some land and buildings [that we leased from the bureau] again, under £3m of that is in trading, and about £3.5m in property.

Okay, thanks for that, and then 2 questions, one on the US, and one on Germany. On the US, perhaps Del could comment what visibility do you have about activity so far? Has the weather affected you in Florida, and so on? And also, how are you set in terms of availability of cement and the cost recovery of price increases? And for Germany -

Let's take the Americas one first.

Sorry, go ahead.

Well, with regard to Florida and the weather, yes, the hurricane definitely affected us. We had Hurricane Charley last month, and it looks like this weekend we're going to have Frances. The biggest interruption we had there was an interruption in business. The actual physical damage, although the hurricane hit right in the heart of our business, assets survived quite well. And I'm happy to say that for the most part, our business activities have returned to a normal state, and in fact, some of the increased housing replacements, etc, will give us some boost of business in future months.

I forgot, what was the second part of your question, the cement shortage?

Cement shortages, availability, costs recovery.

Cement shortages have been a spotty matter in different regions of the US. It started in Florida, but it spread to different parts. At different times we've encountered shortages in Florida, in the mid-Atlantic, and more recently, in the Western United States. That continues to be a dynamic situation based on the weather conditions, which affect cement demand, and the availability of imports.

However, in general I would tell you that the interruption in freight which caused a big portion of the problem has started to get a little bit better on the viability of [corporate] that has actually - I'm very happy with the way we've coped with that end. Our ability to pass price through has been - the pricing is commensurate with the increase in cement price.

Moving to Germany, Ken?

Finally, it was kind a strategic question for whoever, Mersmann is an example of perhaps sort of swaps and arrangements to sort of buy cement, to try and deal with over-capacity, you know, in a more subtle way. I mean, do you feel there are more opportunities like that? And secondly, if we look back to the sort of proposal that came and went, you know, Heidelberg and others buying your business, potentially married up your national concrete business with a national cement business of various buyers.

You know, that's something that you don't have at the minute. You know, as part of your review, you don't have a national cement business, you have a national concrete business. As part of your review of concrete, are you looking at that issue of, you know, whether you should be in concrete across the whole of Germany when you're not in cement across the whole of Germany?

Do you want to say something, or will we ask Stephan?

I think, your first question was, Ken?

It was other more kind of swaps, closures, on either side, not necessarily on your side.

Obviously, Ken, we're looking at the whole portfolio across the whole of the world, and there may well be some conclusions from that, but we don't want to pre-empt that process at this stage. In Germany itself, I think the closure of Mersmann, as I say, importantly removes clinker capacity. We're going to continue grinding at that plant, and serving our customers, but I think that RMC has done its share for now, and we'll have to watch how the situation unfolds.

Stephan, do you want to add anything?

Yes, with regard to the second part of your question, I think we've already left those regions which we do not regard as very attractive, like the south western part of Germany, so we are no longer a national business in that sense.

Thanks for that.

Let's stay with the portside, and then we'll move across the room.

Just staying with Germany for the time being--

Can you just give name and house, just for the record?

It's Tobias Werner from Mann Group. Staying with Germany for the time being, we have seen some steady price improvements over the first half, but the data until July tells us that these price improvements have really stalled from about April to July. There was a slight improvement, about 0.3% which is basically nothing. We have seen volumes falling in Germany by 13% in July. How will you maintain the improvement pricing in Germany, given what is happening here with regard to volumes?

Yes, perhaps, we'll definitely ask Stephan to try and add some detail, but I think we really have tried not to get sucked into the debate about pricing detail in Germany. It really is extremely complicated. It varies quite markedly from region to region, from customer to customer, and from product to product.

We felt comfortable surveying the whole scene and saying that we think our estimate of a €30m uplift in profit in Germany, as a result of pricing, both concrete and cement, is a good number, and one that we're confident of delivering on. So, with that said, I'm happy for Stephan to try to provide some guidance on what's happening more generally in Germany.

Thanks, Adrian. Actually, I can't add very many details. The only thing, last week, the official statistics were disclosed by the Federal Authority of Statistics, and it showed that the price increase in cement, comparing half year, the first half year in 2004 to the first half year last year, saw an increase in 6.7% in cement, and 4.1% in Readymix concrete. And I can confirm that we are absolutely in line with those figures.

With regard to the future outlook, yes, it is true that we will see some further decline, mainly in the Readymix concrete market. As you have seen, with Adrian's presentation, our volumes in Readymix concrete have declined even further than the normal market development, and that shows that, together with our success in increasing margins further, we were quite successful in what we call "smart selling" in targeting the right customers. So we could compensate, actually, for the loss in volumes.

I think there's another over-riding point that the Board does certainly not depend on just some price increases to return Germany to profitability. The restructuring measures and the cost reduction measures are playing a very important part.

Which brings me then, to my second question, my final question, with regard to strategy, clearly, this is only a preliminary review, but are you considering, having put all the cement assets into one business, of floating that business?

I think you shouldn't ask the train travel faster than the Chief Executive has suggested is traveling. We have a lot of thinking still to do. The Board has got a conference next month, when we will be considering David's propositions, so you know, all will be revealed by February next year, as he said.

Okay, thank you.

John, I would say that the fundamental reason for putting cement together in one organization was because we believed that we can actually make the business perform better in that configuration.

Okay, then, just a few last entities, what are the cement profits?

I'm sorry?

Just to give us an understanding of the cement division as a whole, how much profits there are, EBITA return rather than a whole.

We don't actually disclose that, and I think that's something else which will come out in February, and will come out under IAS, where we will be reporting those divisions separately, but for now, I think we'll stay where we are.

Thank you.

Okay, let's come to this side.

It's Roger Collison from CSFB. I had a couple of questions. The first pair is on Germany. If I can just explore the price increases a little bit further, if I look at the information put in today's pack. You've got 2 million tons, €12 per ton price increase. So just looking at it, €6 per ton so far, is the price increase average this year.

If I look at last year's production, about 4.5 million tons, and your €30m improvement, that would imply a full year price rise, on average, of about €7 per ton. Firstly, is my logic right to get there? It seems to me that you're actually disclosing a little bit more than you were announcing before, or is there something that I'm missing, maybe the plant closure, or the extent of trading and that means that you won't be producing the same 4.5 million as last year?

Adrian, I think you might--

Thank you very much, Mr. Chairman.

Shall I ask a second question, to give Adrian a chance?

The answer to that is you are on the right track. In terms of the profit, I think part of the answer was in what the Chairman said. It isn't just about the way prices recover, it's about what we do with the remainder of the business, the losses that we actually avoid as a result of pulling out of areas which we believe are uneconomic. So that's an effect.

The other one, of course, that has an effect on the volumes. The volumes will be different, so I think your numbers are a bit high, and so therefore, your [indiscernible]. You know, it's thought to be in that way, but I think that's - I'm just thinking of your supplementaries. I'm not going to answer your primary drive, which is it is going to be €7.

I think we'll stick on that it's going to be at least €30m over the year on pricing, and this is the reason why we've approached it that way, because trying to arithmetically arrive against volumes, really is exceedingly difficult, and if you look forward, and that was our problem at the beginning of the year, if you look at all the way the variables have loomed since then, I think we're right to not try and give you numbers which you will then try to compare with others, where there is not a comparison.

There are no straight lines, really. The curve of prices is changing in major sides of the year.

And I think the measures that we've tried to give are that prices are recovering, they are recovering perhaps slower than was anticipated late last year, early this year, but the momentum is there, and I think as we go into a new contracting season, late this year, early next year, I think we'll see prices building again.

But it is very hard to predict, and I think also, if you think where we were in February/March, there was a lot of optimism, relative optimism on cement pricing, and some quite stark pessimism on concrete pricing. There were a lot of questions about, you know, with Readymix's concrete exposure, would we be able to pass this through, and so on. The experience was almost the reverse of that. We saw more advance in concrete pricing than we needed to move almost any cement, realistic cement increases, and in fact, we've done quite well in that area, so it just highlights how difficult it is to call the whole balance through.

We're very happy to have a balanced portfolio so that we can benefit almost wherever the price comes, the price moves come, and again, repeating what Adrian's saying, we're much more comfortable sticking with looking at overall, how much do we think we can get out of this market, in terms of pricing. As Stephan has said, there are some very important moves in Germany towards value added products, trying to select the right customers, and so on, so if you take our results and try and average them out, you have to back out that effect, and that's separately tough.

The operation side, sorry, talking on there, is it likely in the second half of this year that that will net off, that is, the costs of achieving those gains, will they be offset by the benefits of those gains, or do we need to wait until next year to see that benefit? Sorry, I do have one further question as well.

Roger, I'm afraid I've lost you. Perhaps Adrian can help?

Well, we did have charges last year, against - which are being, if you like, applied this year, and I'd rather, I think, keep separately, you know, the exceptional charges and the cash against the impact on profit. We're not incurring any substantial new costs in the structure of the business, other than the ones that we showed and broke down last year, at the end of last year.

I think that's a key point.

Sorry, can I ask one final question? The RONA target that you previously set out, before David was in place, can I take it from this, then, that you've mentioned, David, that the 12% remains a valid target, obviously adjusted for any goodwill write-off?

I thought I'd sort of given the indication there. Clearly, that target has been very important to the Group. It's pulled through all sorts of changes. It's pulled through the drive of the cost reduction program. It's been a target for assessing the restructuring plans in Germany. I could go on, so in that sense, yes, we're going through a very expensive strategic review, and that will undoubtedly lead us, and the conclusions of that review, to then decide what should be the future targets of the Group?

Now, that is fairly imminent. We're in that process already, and you know, as I said in my talk, we'll report on that in February, but that's why I also said we're looking to improve financial performance, so I'm not sure where 12% really sits in that except that it has been a big driver in the Group, and we'll be reviewing it.

Thanks, it's Darren Shaw, Dresdner Bank. I had three questions. Just firstly for Adrian, if you could just remind us what is the total asset base on the basis of the 12% RONA that has been talked about?

£3b, £3.9b.

£3.9b? Thank you. I understand in Germany, for either Stephan or for David that, you know, cement prices rises are patchy. Can you just give us an idea of maybe a couple of sort of spot prices in maybe the East and the West, like you've historically very helpfully done, just to get an idea for us?

And then finally, there has been a couple of comments today and in the conference call in June or July, about the surprise done, in fact, in the Readymix concrete business in Germany, things seem to be going better than people in the room may have suspected, at the expense of maybe a slower increase in cement prices. And there was an implication that, I think in the conference before David that, in fact, the profits profitability was going to be stronger and more improved in the concrete side than in the cement. I just wondered if you could give us a bit of detail on that?

Okay, can we just try to take a [standpoint] on the East and West cement prices, Jim? Can you give us some examples?

As we said earlier, the cement pricing in Germany is complex, not least of all you've got internal, you've got external, you've got export and import. To give you an actual figure, Darren, at this stage, I could revert back to you outside of this meeting. I don't have an actual split between East and West that would be meaningful, I think, because of today.

Darren, on the conference call, I'm not - maybe there is a crossed wire here.

I just wondered, I mean, in terms of profitability or loss-making at the German business, a sort of the split of how well the concrete is doing, versus the cement business?

I'm not conscious of actually having covered that in the conference. Was this our conference call?

Yes, I just got the impression that you made out that the actual concrete business was doing better than you'd suspected, and the cement was doing a little bit tougher. Did I get the wrong impression?

As I remarked in the response to Roger, in the first half, we have been surprised, relative to what we thought would happen earlier in the year, at the strength of concrete margins, compared to the strength of cement. Cement has been a bit slower than we thought, in terms of price run-up. Concrete has been faster than we thought, in terms of price run-up.

In the UK, I think when we were talking about concrete in July and August and strengthening, I was referring to the UK where we have seen an up-tick in year-on-year performance in Readymix volumes, and there may be a crossed wire there.

That's fair enough, and just one final question, if I may, can you give us an idea of how performance has been over the sort of July, and perhaps August period, in terms of any changes in the sort April/May/June period across all the major parts of the Group?

Well, starting perhaps with the UK, July is traditionally a strong month, and volumes in Readymix did pick up. In August, there have been some weather impacts, but I think overall, Readymix in the UK is probably now sitting about 3% ahead of last year, but a lot of that is concentrated in the North, so that North/South split remains. That is not particularly good for us.

Across the rest of the business, I think Del's probably given you already an indication of the United States. Jim, is there anything else that strikes - perhaps, Gerard, is there?

July was a very good month in my country, compared to April, March and [February], so it was a normal month, and then there was a less good month.

Stephan, do you want to say anything on Northern Europe?

It was a very good month in Austria and Poland, with regard to materials, and in Germany, it was in line with our expectations.

Okay, now I will go to the back of the room, central aisle.

Thank you, John Lynch, Lynch Research, New York. I've got a question which I've asked over a period of time, which I know the answer to is in the past, but on the basis of what you said about balancing your three core businesses, it strikes me that you're a little low on cement in the US? As I say, I've said that before. You can't increase that plant in Northern California unless you go to blended cement. You have rigid controls. You're in the middle of a highly populated area.

Have you thought about a) building a new plant, and keeping in mind that's about a four year project, which might bring you out about the time the present market is weakening? Second, have you thought about other US activities? There have been plant turnovers in Florida, and other markets that you have some interest in. Do you sense that you will try to balance your cement and your concrete and aggregates in the US?

Del, I think this is your great opportunity to talk about cement supply in the US.

Well, we have been doing quite a strategic review ourselves, and we are looking at opportunities all across the United States that may or may not quite give us an increased position for cement. We certainly aren't placed to announce anything, but we are looking and considering the balance in each of our markets.

In other words, you may have opportunities there, and you may take them?

We may.

All right, okay. Second question is -

We'll buy them, and then say if they're good!

Right. That market place gets bad press. I was asking again here about housing and some of the home builders had bad results they're reporting, and the answer is no, they don't. Standard Pacific reported a decline of 25% in its new bookings, but they went through two markets from booking during that period, as they changed product, and they have record backlogs. They're hardly at death's door. No other builder has reported any negative new orders, negative backlogs, nothing going on.

We do have a rise in commercial. It's small, it's at a low level, but it's positive. So looking at that, have you considered growth beyond just adding a cement plant but looking to buy other local concrete operations, aggregates, and others? I would like to get a broader answer than the one I got. It might be the same answer, but to see what -

I'll let the Chief Executive try to give you the same answer in a different way!

The United States is clearly, given our coverage, we have strong positions on the East coast, and on the West coast. It's clearly an area where we would look to deploy more capital if we can find the right opportunities. I think you're right to note that we have a cement short there, and if we can find an interesting opportunity in cement, I think we'd look at it quite seriously.

In terms of aggregate, I referred in my talk to the fact that Aggregates, structurally in the US, is a very attractive business, but that asset prices are high, so once again, one has to build one's pipeline. A lot of this is bolt-on acquisitions, buying out family businesses, and so on. You need to build a pipeline, and then you need to be able to take the opportunity as it comes, and we have a few of those, but it's far too early to comment on any specifics.

Thank you.

Thanks, it's Imran Akram from Deutsche Bank. Can you remind us what the in-house use of cement is in your DK and German operations? And just related to that, is it fair to say in light of what you were saying about the relationship between Readymix and Cement, whether your UK and German market share in Readymix is now stabilizing at these levels, or whether we should expect this to maybe decline, going into the future?

So that's the consumption of cement in the UK and in Germany?

Yes, let me take the overall. I think, overall, we consume about 20% of our own cement, globally. In the UK, obviously that's a higher number, and in Germany also. In the UK, it ranges, actually, from between about 40% and 60%, of our own consumption, depending on circumstances. Germany, is there a number for Germany in your mind, Stephan?

Yes.

Right, I mean, the customer or the supplier?

No actually, we have reduced the amount of in-house supply significantly during the last couple of months, due to our program of the optimization of logistics, and so we reduced the level from slightly under 60% to 40%-45%.

Okay. There was a second supplemental question?

Yes, the market share in the UK and German Readymix, whether you think that's going to be stable at this level, or whether there will be a decline going forward?

In the UK, I think it's important, both certainly internally, but also externally to say, as I did in my presentation, that in the current market, we look to get the most value that we can out of our existing Readymix share. Stephan, a comment on German Readymix?

Yes, for Germany, I might add that during the last couple of years, we saw a decline in our market share from roughly about 17% down to 13% to 14%. I would think that you have seen now the bottom of our market share, and it's a reflection of our responsibility as being the market leader in reducing capacities, as it was mentioned several times, but I think we are now through.

Okay, I think someone was waiting on this side, second row.

It's Mark Lewis at Citigroup. A couple of trading questions - you've very kindly given us some more details in the back about the various countries such as Croatia and Spain, and I was just wondering whether you could sort of expand on sort of what's happened in those markets? It looks as if you've lost a fair bit of market share in Croatia in cement, and you've also had some aggregate issues in Spain as well, in terms of volume. So I was just looking for a few more details on that.

The final question was on Readymix concrete prices in the UK, whether, on the back of a slightly better market in July, whether you've actually started to try and get prices up again in that area?

Okay, perhaps we could ask Jim on Croatia, and Gerard on Spain?

Yes, Gerard, if you take aggregates in Spain, in terms of market share?

I do think that in Spain our market share is not enough, [indiscernible] we've just bought a big company and we can start sort of [inaudible]. It's two big quarries and [indiscernible] and of aggregates plus having a new concrete [platform] so we have a big network in the Readymix concrete business, but it's not enough regarding our aggregates business compared to our Readymix concrete business. So we have made a deep review about what we could do in Spain to actually improve our market share, but today, it's not enough.

But I think the first half figures showed your aggregate volumes down 13% against industry, that was up 2%. What was happening on that one?

Yes, but it's not due to a loss in our market share, it's due to the fact that we closed a big quarry in [Bedes] in Spain, and it saw the fall in our volume in 2004. That's due to the fact that we closed one big quarry, but it's not due to a loss in our market share. The market share is quite stable.

And Croatia, Jim?

The Croatia price is very much about regional demand profiles. As you may recall last year, we had a very strong domestic year in Croatia, as a result of a higher rate in bookings, Zagreb down to Split. That is primarily finished, so the benefit that we had last year, in the short-term, has come to an end. There's another phase that's due to run from Zagreb down to Dubrovnik which we expect to start some time next year, so it's very much a sort of temporary, regional demand imbalance in terms of the first half of this year, driven primarily by a single infrastructure project.

And I think your last one was on Readymix prices in the UK? It is actually hard to foresee more than a few months ahead here. We are in quite a weak spot. Weakness is patchy, I think, as others have said. The Midlands is particularly difficult. Obviously we look for all opportunities to move things up. There will be some cost increases coming through, early next year, as the impact of things like energy runs through cement into the business. We'd certainly be looking to try to recover that, and any other opportunities we have to mix things up, but it really isn't an environment at the moment. As I said in my presentation, our priority is to maintain our market share, stabilize things, and then try to build from that base.

It's John Messenger, Morgan Stanley. I have a couple of simple questions, and a couple of strategic ones, hopefully. Just on average debt, could you tell us, Adrian, what the average debt actually was? I know you mentioned the drop, but so we can get an idea of what the Group's cost of borrowings was?

Yes, the cost of borrowings, sorry, it's about 5.9% overall, cost of borrowing in the first half, so you know, from the interest, you can calculate the average debt, which I think is about £750m, from the core [facility]. Just let me check on that debt number, cost of debt. Yes, the average in the first half was 5.9%.

And has there been any market shift in variable versus fixed?

We haven't gone into the market to change our portfolio. I mean, our federal strategy is to keep between 20% and 50% fixed, and for a period, we've obviously benefited from having a substantial amount of debt in low interest cost floating. But what we have done is obviously we've been receiving a lot of cash in, and we've applied for that to a floating rate, but obviously, you know, we try to retire at cost placements.

So the element of the fixed rate has increased, but we haven't had to go into the market to do that. It's just the matter of the way that we applied debt repayments.

Right, and apologies if it's in the past, but globally, against your £50m of targeted savings, you mentioned £21m coming out of the UK on a full-year basis, but what did you actually unlock in the first half of that £50m, and what are you expecting for 2004 in totality?

Yes, we actually, unless we did provide the guidance here from the slides which we might have actually repeated here, but decided not to. The contribution is about £8.5m in the first half of this year, and I think it's about £22m, £21m for the full year, is what we're looking for in terms of benefit from that cost reduction program.

And just on the goodwill, coming back to the point, if we set aside the 12% RONA, which inland, well, we're looking at the absolute that it produces, which is the £350m of EBITA, what are you driving at when you talk about potentially writing off goodwill? Are we still holding to that £350m as the number you believe the Group can produce in the medium-term, of profitability? And behind that, is the difference, in terms of write-offs, just an issue of the prudence of the auditors versus your optimism, or is there something else we need to bear in mind in considering?

Well, I suppose it's to some extent, rather than proof. Rather than a point, you know, one side as being prudent and one side being optimistic, I mean, it is about the dialogue that's been going on, but it is actually a very, I think, close process. It's very proscribed, and that's the way that we operated last year.

We have targets in place to achieve the 12% RONA target, and I was asked this question, last year. How on earth can you get to 12%? We've got assets of about £2.9b. I mean, I think there are some very key elements of that. You know, we've got to fix Germany, and that's coming along. We've got to deliver the cost reduction plans, and drive down continuously on the costs. We're on track on the £50m. It's a tight program, but what next?

We've had a delay in the recovery at Rugby. It's going to be deferred. We're looking for that recovery to come through next year. We talked a little bit about investment, and about pipelines, and about a company that's been selling a lot of assets and maybe its pipeline does develop. We've spent a lot of time in the last six months under David's direction, you know, strengthening that capability, and a combination of those, and good investments would get us there, and I draw the line, and to try to do, by saying we're now going through a very extensive business review, and I think quite rightly, out of that, will come targets.

12% has been very important to the Group, but its relevance will be tested through the strategic process, and that's what will come back, and certainly part of our strategic update will be an update on our approach to financial targets. It's not walking away from the 12%, it's saying -

I think we still view 12% in the business to drive performance of the existing asset base. We also understand what the five or six key components are, which you do, which if they come right, can deliver that performance, and if any of them don't come right, will be an issue, will be a problem. Adrian's run through a couple of them.

I would actually emphasize, that there does need to be some spending on new EBITA in order for us to be able to get there, and hence, in a hurry to sort of at least get the big building blocks of the strategy in place, so that we know what we're going for, get the pipeline built, and be ready to act, but acquisitions, bolt-on acquisitions are not something you turn on and off, and so we're hopeful of achieving it. So I really want to bring the 12% into a more useful format which, as I say, what are the components of it, and how are we doing on each one, and we're progressively trying to share more and more with you, how we're progressing on each of those targets.

And finally, and then I'll shut up, when you look at the £40m, you've kindly provided a figure for cement profits last year of £40.1m. I assume that ties into the second answer, that cement, plus concrete products, with lime gone, would imply that concrete products lost just over £7m last year? Now where is that, and on the back of it, concrete products, as a separate downstream area, on the comments you made about the core product areas of the Group there, where do the concrete products activities sit? Are they again akin to Readymix Concrete itself, or is there a different strategy there?

Well, first of all, I mean, just on the numbers, John, and I think we should have told you, they're not disclosed numbers. You put two and two together, I don't think you've necessarily got four.

So £40.1m doesn't translate into the reported numbers we saw, [necessarily]?

It probably will not do.

Okay.

In terms of where we're going with building products, I said it was early days. What I'll be keen to find are a number of building products businesses which we want to actively develop, and I want to look at the rest and see where they best fit. Now, which ones those will be, what the geographic spread of those will be, I'm afraid that will have to wait for February.

Kevin Cammack at Cheuvreux. I've just got a couple of questions on the strategy, and just one trading question that I'd perhaps like to start with. There have been some rumors or suggestions or whatever that you took out quite significant term contracts to cover you for the down production at Rugby earlier in the year, which may partially explain why you're, I guess, slightly cautious about the recovery in the second half. I don't really want you to comment on that, but my question is, how confident would you be if that is the issue, of getting back to 2003's profit at Rugby in 2005? I mean, is that the sort of scale of recovery we're looking at? That's the question on trading.

On the strategy issues, it seems like the core businesses, capital C, are Cement and Aggregates, and obviously we all know they're pretty expensive assets to buy, particularly Cement assets. Could you comment on what you feel the business has the capacity, in financial terms, to contemplate buying in its current structure, or does it mean that you have to more seriously consider going into, sort of, major joint ventures, etc, to achieve your goals in Cement and perhaps maybe less so for Aggregates? I'm more interested in what you feel the business now has the capacity to deliver in terms of expansion.

And the third question, which -

Sorry, Kevin, there's no way I'm going to manage to keep all 3.

I think we ought to start with the first one, which is how do you deal with rumors of Rugby on the term contracts. That was the first one, wasn't it?

Yes, I'll try that, and Jim may well help me out if I get lost. Perhaps more detail than you want, but the problem at the beginning of the year at Rugby was as a result of production shortfalls as a result of some new clay that we were bringing to the plant, and we didn't anticipate some process problems with that. It took a while to sort out, which meant that we produced less volume than we'd anticipated.

Now, if you remember, late in 2003, we were actually getting quite optimistic about Rugby, and the management there actually turned off a number of import cargoes which they were planning to bring in during the first quarter, because they were confident of their ability to continue to produce.

At the same time, as you're aware, it's public knowledge, Tarmac were bringing on a big slug of capacity at Buxton which was delayed for three or four months, and we continued, in fact, to support them as a customer so there was a reduction in import, so we had less coverage, there was a reduction in production, because of our problem, and there was an up-tick in the market where we tried to support a long-standing relationship.

Those three came together in a sort of perfect storm, and left us horribly short of clinker and we were importing it, lots of logistics costs and so on, trying to keep our customers happy, and I think for the most part, we managed that.

We have an import program which is not a long-term interval. There's no question of being locked in, but of course, what the management is now saying to itself is, are we going to put ourselves in the same position again, of being so optimistic, taking an aggressive position on imports, and finding ourselves perhaps caught either by up-tick in the market, or perhaps, touch wood, not by some minor production blip.

So we are definitely in the second half playing a more conservative game, and therefore, we're not perhaps getting as much out of Rugby as with hindsight we will say we could have done. All that, I think, unwinds during the balance of this year, and provided Rugby goes well, and provided that prices remain strong, and so on, there's no reason to believe that Rugby won't perform in a normal way in 2005.

And then I think the audience being hell-bent on us buying cement plants are asking about the financial firepower. Is that a fair way to put your question, sir?

Absolutely, far better than I ever could, Jim. Well, you're up there and I'm down here.

I don't forget a pretty face.

I mean, I really don't want to go into too much detail on that until our review process is over, because I mean, clearly, there are ways of bringing money into the corporation but which may go beyond simply our improvement in cost performance and margins, and so on. But you know, if one looks at the firepower, and looks at what we believe is the potential of the portfolio, there's no doubt in my mind that joint ventures, alliances, linking up with other companies, has a role to play, has a potential role to play, anyway, in the restructuring of the Group.

If I could maybe push it one stage. Would you be prepared to go back to a virtually 100% geared business if your interest cover multiples, you know, stayed broadly around 5 or something?

I think that's one major factor, isn't it, in judging your level of gearing, but it's the volatility that we expect from those earnings against that interest cover, so I think that will come out in February, because I think when you ask that question in February, we will be in a position to give you some much more detailed answers.

But I think the Group, once it has been over-stretched, doesn't want to be over-stretched again, we believe.

Thank you.

Okay, are we all done, because I think those who are going to the other meeting will now need to catch buses, but can I say thank you for coming.