Ferguson Enterprises Inc (FERG) 2017 Q4 法說會逐字稿

Good morning, everybody, and welcome to the stock exchange this morning. Thank you for coming along to our full year 2017 results presentation. I'm really pleased this morning to welcome a new boy, our new CFO, Mike Powell. Many of you know Mike from his previous roles, but it's great to see him now wearing Ferguson blue colors. I should also mention an old boy. We've got our Chairman, Gareth Davis, down here at the front, making sure that we stay on song today.

Look, I'm just going to summarize a couple of the highlights of the year, then hand over to Mike for the detail of the operating and financial review. And then I'll close on strategy and how we're executing that strategy.

Firstly, the highlights. Look, from where we were sort of 6 months ago, actually, market conditions improved and commodity deflation eased in the second half. So we grew overall at 6% this year, and that's over 8% in the final quarter. We were very pleased to make further progress on the gross margin, up 40 basis points, and about half of that is underlying improvement. And trading profit well ahead, 8.7% up on last year. We also delivered our best-ever working capital results. We're very proud of that.

On strategy, last year, we started out with 3 objectives. The most important of those being to achieve above-market growth, stronger growth in the U.S. Our strategies seem to be working because the growth in all of our major business units improved, and we grew across all regions in the U.S.

In the U.K., the transformation is on track, but it does remain very early days. In the Nordics, as you know, we clarified the strategy, and we also tidied up some of the other investments in the portfolio. We did some decent disposals during the year.

The most significant development, though, in the business this year has really been on the people front. The handovers both to Mike and also to Kevin Murphy towards the end of the year, they've been done really thoroughly and with the minimum of fuss. It is great to have such talented and experienced executives now in place to take the company forward for the next stage of our developments.

If you get the company's name wrong today, we have a charity box. It's GBP 10. It's nearly full already. And as you know, now these are our last numbers in sterling. We are making the change now to dollar reporting, that project being pretty much done.

Finally, really strong cash flow and also disposal proceeds. That's provided us with the opportunity to do a GBP 500 million share buyback program, and Mike will start that shortly.

Now I'll hand over to you, Mike, for the operating and financial review.

Thanks, John, and morning, everybody. Clearly, a pleasure to be here to do my first set of Ferguson plc results. And I've met a few of you already, clearly 1 or 2 more to meet, and I look forward to doing that in due course.

I think, first of all, overall, you can see 2017 has been a good year for Ferguson. Total group revenue increased to GBP 17,324 million, and trading profit up to GBP 1,122 million, a good result which we're very pleased with.

As John mentioned in his introduction, it's been a busy year, and our actions have created quite a lot of noise, particularly for the accountants and the way we present the results to yourselves. So for the sell side here, hopefully, this slide is a format that you will recognize for the total group numbers. It's also consistent with most models that are out there and consistent with the consensus that is published on our group web page.

However, that's not actually how we put the results together as accountants, and I'm going to take you through how those changes impact the formats. And then I'll take you through the trading performance of our ongoing businesses as we move forward.

So firstly, a picture to explain the accounts. On the left-hand side, you can see how we've reported the business previously. And then on the right-hand side, the 3 boxes is how we report today in our continuing and discontinued operations.

Our continuing is made up of ongoing. That's the businesses we're going to take forward, and that's what I'll mostly talk to you about today in terms of trading performance. Then we have the non-ongoing. These are the 2 small disposal transactions in the year, being Endries and Tobler. The results of these businesses are actually included in our statutory continuing results up to the dates of us completing those transactions, but I have pulled them out today to clearly help with modeling.

Then on the far right-hand side is our discontinued business. This consists of the Nordics businesses and the French property assets that are held for disposal. And as I say, we'll try to simplify as we walk through. And clearly, all comparators have been restated.

So on to the financial highlights. This is the continuing ongoing box. You can see here revenue at constant currency, up 8.6% for the year, driven mainly by good U.S. markets and continued market outperformance. Gross margins increased 40 basis points, which is a great result coming from both a better mix of our value products and services and also our improved procurement across the business. And this, combined with some operating cost investments, has led us to an operating trading profit in the year of GBP 1,032 million, up 8.7% at constant currency.

Overall, the group trading margin grew 10 basis points. Headline earnings per share, up 6.8% at constant currency, reflecting that good trading profit growth. Working capital, well-managed through the year, continues to be, generated strong cash generation. And after the proceeds from those 2 disposals of Endries and Tobler, our net debt at the end of the year was GBP 534 million. We've increased the ordinary dividend 10% and also announced today a share buyback of GBP 500 million, which we'll complete over the next 12 months.

In terms of our like-for-like growth, we continue to outperform our key markets due to our continued good work in our businesses as we develop our customer propositions. Our growth in the year is supported by improving markets in the U.S. and Canada. First half of the year, as you know, saw declining industrial markets and some commodity deflation. The second half improved on both counts, slightly positive industrial markets and low levels of commodity inflation. Overall through the year, therefore, we had a particularly good last strong quarter.

Now in terms of revenues and trading profits on the next slide, on Slide 9. On the left-hand side, you see the revenue, and on the right-hand side, the profit are now bridged from last year's numbers through to this year's numbers.

Taking the chart on the left first. On the revenue, you see the GBP 12,146 million to the GBP 14,878 million. First is the exchange bar of GBP 1,550 million, taking us up to the GBP 13,696 million. And then after that, you can see the constant currency growth over the next 3 bars representing the 8.6% that I've talked about. That's compromised (sic) [comprised] of 3 areas. Like-for-like growth of 6%, which when you add on the net new branches of about 0.1%, you get to the 6.1% organic growth. One more trading day in the year added 0.4%, and acquisitions added 2.1%.

Moving to the right-hand side, you see the profit effect of each of those, bridging from the GBP 827 million to the GBP 1,032 million. First bar, as before, is exchange of GBP 122 million, taking us to the GBP 949 million. In the first half, you can see the flow-through, as you know, was quite weak due to the commodity deflation and the industrial decline. Second half has been better. We saw good organic trading profit growth and good overall GBP 41 million. And that's after, of course, we've made those further cost investments in our business as we look to continue to grow into the future. Additional trading day of 9, and acquisitions added 33.

Let me move now onto the markets and the regions individually. First of all, the U.S.A. U.S. had a good year, represents about 90% of our trading profits. Revenue was strong. Gross margins good and grew well, mainly from the improved mix of products and services and the channels that we offer to our customer. Our costs grew as we made investments in technology, marketing and fleet, along with associated labor investments into our associates to maintain our high levels of service. Trading profit of GBP 950 million, GBP 189 million ahead of last year. And growth at constant currency was GBP 73 million. Trading margin decreased a touch, but still at 8%.

That growth was pretty broadly based across the U.S. and across all our businesses. Here, you can see all our businesses grew like-for-like. The Blended Branches, which is the map on the right-hand side, grew well in all regions. And growth -- good growth coming from performances in residential and commercial. You can see growth in North and Central. That reflects the improved performance from the recovering industrial markets in the second half.

Waterworks standalone business continues to outperform in a quite a tough market that's broadly flat. And B2C e-commerce growth has been supported by our technology investments, and John will touch a little more on those later. Those sharp-eyed amongst you as well will also note that we've changed our name from CMRO to Ferguson Facilities Supply, which is the name we actually trade for that business in the U.S.

Now let's look at those end markets. Demand in residential markets was good. Residential sales, which now represents approximately 50% of our business, grew very well, between 9% and 10% on an organic basis. Commercial market also good, slowed a touch in the second half, and we still grew very well in that market. Civil markets, tougher, slightly negative, but we continued to be pleased with our outperformance here. And finally, industrials, again, the weak first half year, broadly flat across the whole of the year. That's the U.S.

Onto the U.K. Overall, the U.K. market still remains challenging. Tough RMI market in the U.K., which is where we generate the majority of our revenues. Pipe and Climate, Infrastructure and our B2C business markets were slightly better in the year. You can see that the U.K. business recorded a like-for-like growth in the year of 1%, with growth in Pipe and Climate, Infrastructure and our soak.com businesses, generally offsetting a decline in the Plumbing and Heating business.

Gross margins were solid, grew a touch. And whilst operating costs were slightly higher, this did lead to an improved trading profit performance of some GBP 2 million, taking us up to GBP 76 million, improving the margin by 10 bps. These results are clearly before GBP 40 million of exceptional costs, which are in line with those exceptional costs as the transformation progresses that was announced a year ago.

Good progress in Canada and Central Europe. Canadian and Dutch markets improved in the year, with decent growth in most regions. Revenue in Canada and Central Europe grew 3.6% on a like-for-like basis. Margin is broadly flat. Costs well-controlled, which led to an GBP 8 million improvement in sterling for these businesses, GBP 6 million of which was foreign exchange, but still a good underlying improvement for Canada and Central Europe.

So as the continuing ongoing business is dealt with, on this slide, I touch on the non-ongoing and the discontinued, so the second and third box of that chart. On the top half is the non-ongoing. These are the 2 small disposals. They're non-repeat items. And as I say, I pulled them out to aid with understanding. Tobler in Switzerland was disposed of in April, which we now own 39.2% of, and we've combined that business with Walter Meier. And Endries was sold in June. The gains on these disposals are shown in our exceptional items, which I'll come on to.

Nordics business has been classified as discontinued operations, in line with the accounting standards, and as such, has been shown separately in our statutory results. Additionally, within discontinued operations, other remaining French properties which are being disposed of. However, on Nordics trading performance, whilst having had a first difficult half year, the second half performance much better. We had good growth in both revenues and trading profits. And in terms of the process for the Nordics, John will come back to in his slides.

Exceptional items. We made gains on the disposals of Tobler and Endries of GBP 266 million, majority of which we received in cash. And as part of the U.K. transformation, we spent GBP 40 million of exceptional costs, about half of which was cash.

Financing and tax both came in as expected in the year. The increase in financing charge is mainly actually due to foreign exchange because most of the interest costs are in dollars, as is the debt. And ongoing tax rate was 28%, broadly in line with advised.

So on to the cash performance, which continues to be very, very good, driven by the underlying trading profit of our continuing businesses. We start at the top of this slide, with continuing trading profit of the GBP 1,059 million. That compromises the GBP 1,032 million of the ongoing business that I've talked about and the GBP 27 million of the non-ongoing. Then add back the depreciation and amortization for those businesses, you get to the EBITDA of the GBP 1,199 million that you can see on the third row down. And we've worked hard on working capital, and that generates good cash flow from operations of GBP 1,115 million.

Interest and tax. Cash outflows were higher [than] the P&L, expense due to the timing of our tax payments and the tax that we had to pay on the disposal of the Endries business. We've invested GBP 256 million back into acquisitions, GBP 178 million into capital expenditure. The CapEx actually a touch lighter than we might have expected earlier in the year. That's purely only timing of the projects, and I'd expect that to pick up to normal levels in the current financial year '18.

So after GBP 267 million of proceeds from disposals and returning GBP 259 million to shareholders via ordinary dividends, we finished the year with GBP 402 million reduction in our net debt.

That all means that we finished the year in a good position. Net debt-to-EBITDA of about 0.5x. Pension liability on an accounting basis was reduced to GBP 21 million, principally due to funding contributions in the U.S. and the U.K., and the disposal of the Nordics business into discontinued. Operating lease commitments have remained consistent with last year at GBP 854 million. And as I've said, we increased the dividend 10%.

So on to Slide 20, on capital allocation. Here, we continue to generate good cash in our Ferguson business. This business is highly cash-generative. And I've looked at the cash characteristics of the business since starting, and I think it's entirely appropriate to maintain the current net debt-to-EBITDA ratio of 1x to 2x for the business, and we'll continue to maintain the same priorities for the use of cash. I've reminded everybody of those uses of cash and the priorities in which we think of those as a business. We'll invest in our organic growth. We have a progressive dividend policy, which aims to grow the dividend, in line with the long-term underlying growth in earnings. We'll then use cash for investment in bolt-on M&A, which meet our investment criteria. And then any surplus cash will get returned back to the shareholders on a reasonably prompt basis.

In terms of acquisitions in the year. We continue to target good businesses. These meet our investment acquisition criteria, add to our organic growth as we move forward. Nine acquisitions completed in the U.S. in the year, a further 5 since the year-end. We completed 2 also in Canada, and 1 in the Netherlands. Total consideration, you can see, GBP 292 million for the businesses, with annualized trading profit of GBP 32 million and consideration since the year-end of some GBP 80 million. The acquisition pipeline is reasonable at the moment across a good range of businesses, mostly modest in size.

So looking forward, as John says, these are the final results in sterling. We will publish in U.S. dollars from our Q1 release. And therefore, all guidance on this slide and all guidance that we'll give today will be in U.S. dollars. Going forward, we'll also report the group on an organic -- the sales revenue, we'll report on an organic growth basis rather on a like-for-like basis. Organic revenue growth includes the impact of branch openings and closures, and actually aligns to how we report the business internally. It's actually how we run the business internally. The impact of the measure between the 2 is very small. This year was 0.1%. And over all years that I've gone back and looked at, it's much less than 1% in any territory, so a much more relevant measure for us as we move forward.

You'll be pleased to know there's no trading days impact across the year or even in any quarters, so we won't be talking about difference in trading days during this financial year. We'd expect an additional $10 million of trading profit from the acquisitions I've talked about that have already been completed and so far in FY '18. Exceptional costs at $65 million, that's the remainder of the U.K. transformation spend, again entirely consistent with previous guidance. It's the balance of it. And I would expect the effective tax rate to stay at approximately 28%.

Capital investments will pick up slightly, and you can see the guidance there from this year. And working capital, no change to our normal guidance, which consumes about 12% to 13% of the incremental revenue. And that's it. So a walk through the continuing ongoing business, which are the businesses staying with us, touched on the bits that we've disposed of during the year and the bits that we will dispose of in the coming 12 months. Good set of results for FY '17, and really pleased with the momentum that we've got coming into this current financial year.

I think with that, I'll hand back to you, John.

Thank you very much, indeed, Mike. This time last year, we had 3 key priorities. After the slowdown in industrial markets and commodity deflation in 2016, we were very focused on getting Ferguson back to making really good growth, above-market growth rates. That was and remains our primary focus.

And our team has done a really great job. They've continued to focus on gaining market share profitably, really by doing 3 things: one is fulfilling our customer wants; second, pursuing attractive opportunities, both for organic growth and also for fill-in acquisitions; and thirdly, executing our plans, both thoroughly and quickly. I want to touch on each of these now in turn.

Firstly, what do we mean by fulfilling customer wants? Well, our customers are not usually just doing a simple transaction. They're building, they're renovating, they're developing, they're installing projects, and their wants are more complex. Excellent availability, quick and reliable delivery, account-based credit, large and convenient branch network, all those are givens, but our customer expectations just go way beyond those givens.

Even if you look at sales channels, most of our large customers, they choose to interact with us in a number of ways. We visit them in their work sites, and there are often deep and very enduring relationships between our customers and inside and outside sales associates. Some interactions are via call centers, over-the-counter, online or by mobile device. So we want to talk today a little bit about how we fulfill customer wants, how we provide them with best-in-class customer service, as confirmed by our very strong Net Promoter Scores.

So we're going to take a few examples here from the chart. Firstly, bidding for business. We have 5,200 inside and outside sales associates. It's their job to really understand our customers' needs and wants. It's their job to identify the most appropriate products, to source them and to price them. We help our customers win work. When they are successful, we are too. And that accounts for over $7 billion of our sales.

Our prices are project-specific. We work with our customers to help them to save money. We identify products that are missing from technical drawings. We advise them on alternative products that are available. And some bids can run to hundreds and hundreds of products. Where products are not stocked or difficult to get a hold of, we identify the best source of those products. We negotiate prices. We arrange delivery. And we bring them either into our branch or into our distribution center to be collated with the rest of that order. $1.5 billion of our revenue is earned in this way.

If our customer doesn't win an order, then nor do we, and that provides really great motivation for us to work very hard with our customers to find solutions for them. Now often, our customers want solutions which are specifically tailored for them to help them to become more efficient. We assemble kits. You can see some of them here on the chart. We assemble kits containing all of the products, the fixtures, the fittings that are needed to carry out a specific installation without waste. We have [some] assembly sites, which prepare modular heating and plumbing solutions for either multi-residential or commercial properties.

More than 150 of our branches provides 24-hour emergency support for the replacement of commercial water heaters. We deliver those water heaters with all of the required fittings, anything that's needed to fit that water heater and we arrange for the removal of the broken equipment. That revenue stream alone is worth $200 million a year. Our fire suppression and Waterworks businesses, they provide more than $300 million of fabrication services, most of those are pretty automated. They also provide job-specific labeling and instructions for ease of installation.

Let me just touch on showrooms. We don't talk about showrooms very often. We have 270 showrooms. They are not cash-and-carry stores. They are an opportunity for our customers to experience the dedicated service of 900 highly trained showroom consultants, and also to touch and feel, to experience quality kitchen, bathroom and lighting fixtures.

Our consultants visit our customers' homes. They help them come up with the designs that our customers love. And following that consultation, the customer receives a detailed color brochure, including photographs and the price and specification of each selected product. After that design is finalized, we source any non-stock items. We hold that inventory until it's needed. And we arrange 2-person delivery to the appropriate room, and we arrange installation. And throughout that project, the consultant stays in touch with plumbers, with heating engineers, with joiners, with electricians, with whatever trades to coordinate those deliveries and make sure that installation is done properly and that any problems are resolved quickly.

What about pricing? All of our customers want great value. And we aim to be competitive with all of our pricing. Some customers are particularly price-sensitive, either all or some of the time. But we leverage our buying power on behalf of our customers. We leverage our DC and branch infrastructure on behalf of our customers to lower logistics costs. And we help customers to select the appropriate sales channel for their needs. If they don't want expensive sales account management, that's fine. We also select the most appropriate and cost-effective distribution channel. But if -- so if our customer doesn't want or need to use the accounted channel, we can deliver product directly. We expect to have the best cost ratios in our industry, that will help us keep our pricing competitive and make a fair return.

On delivery, we have an incomparable range of options. Some customers want to pick up their supply directly from the branch, really relying there on the breadth of our range and the excellent availability to fulfill their needs with the minimum of fuss. They may also want to get advice on alternative products, on technical matters, on compatibility between products. If a customer is particularly time-sensitive, they can phone in an order or place it online and use our Will Call service. Then we can [bake] and pick up that order within 1 hour. We did over $500 million of sales that way this year. Nearly $6 billion of sales are delivered either same day or on the next day, whatever the customer wants. Other orders are delivered at a later date as the customer needs them. Many orders specify multiple delivery dates and also multiple delivery locations. And we have a tag-and-hold service, that gives 100% peace of mind regarding product availability. Larger items, as you can see, larger items on the bottom left here on the chart, they need specific handling equipment, such as the crane truck that you see on the chart. And over 90% of all of our sales are on accounts.

I hope that gives some flavor of some of the value that we add to our customers, in addition to the broader selection and the best availability in our industry.

Now let's move on to an example of some of our regional growth opportunities. Our home market of the U.S. is very large and still quite fragmented. We talked before about the opportunities for substantial growth in markets like Chicago and New York where we've been traditionally underrepresented. New England is another great example. We went here with the board in July. We have the infrastructure to address these markets and to serve our customers very well. Our New England branches are replenished from a distribution center that we built a couple of years ago in New York state. Our development plans here include ambitious organic growth targets combined with acquisitions. In this instance, we used an acquisition in 2005 to build local credentials and really get a kickstart to that growth. And that was a small showroom business.

Okay, last year, we acquired Redlon & Johnson, which was a specialist in hydronics. And earlier this year, we bought PV Sullivan, which is a specialist in commercial piping. Now we've got an impressive 9% market share in the region, but a huge opportunity here to grow, both in our core plumbing and heating market, but also in waterworks, in industrial and in fire protection.

Effective execution of these strategies is absolutely key to delivering profitable growth. And we continue here -- we picked on a couple of examples, one is in our e-commerce and customer-facing technology. We're continuing to develop these execution capabilities to make sure that we can service our customers better and also to lower our own cost to serve. This increasingly focuses on technology, providing better functionality and better opportunities to integrate with us and to simplify the ways that the customer can do business with us on various advices -- on various devices, I should say, and also across various operating systems.

Mobile features allow customers to check product availability at a local store or a DC, to view product images, specification sheets and installation guides. Customers know we can turn a quote into an order and quickly place that order for delivery or pickup at the local Ferguson counter. Customers can review purchase history and create lists of products they buy more frequently. They can check order status. They can view proof of delivery details and check the account, all on mobile. Customers can scan bar codes on mobile, upload them onto Ferguson online to create an order or a list.

We can arrange for customers specifically to access our online stores from their own procurement systems. That gives them a personalized storefront to search for products and create a shopping cart. Checkout can then go through their own internal approval process, create a sales order in our operating system.

We have a number of tools to help customers manage inventory: bar code scanners, vending machines, product catalogs and other customized tools. These can help reduce shrinkage and help the customer control operating costs. And those inventory management services, they are built around the customers' business processes so they can minimize replenishment times and increase their productivity.

Overall, e-commerce revenues last year were $3.3 billion, and there were 18.5 million customer self-service events. $1.1 billion of e-commerce revenues were earned in our B2C business. That was 34% ahead of the year before, including the acquisition of Signature at the start of the year. And this year, we launched mobile apps in the B2C business, allowing customers to communicate with sales associates directly, introducing new planning tools to enable them to organize their projects and manage their communication with their contractors. About half of B2C sales are made whilst a customer is talking online with somebody in our call center.

Ferguson's strong culture of gross margin expansion is partly due to development of our own brand products. These now represent 7% of sales but a significantly higher proportion of gross profit. We have to work hard, by the way, for that additional gross margin on those products. We have to allocate resources to specification, to design, to sourcing, to quality assurance, to import management, sales and warranty support for our own branches. We also have to hold additional inventory. But our own brand products, these provide us with a source of differentiation. We're selling quality products at competitive prices which are not available anywhere else.

In addition to own brand, many of our vendors give us products to sell on an exclusive basis or under sole distributor arrangements. Those are usually accompanied by very high levels of marketing and after-sales support from us. So we believe we have plenty of reasons to be optimistic that we will carry on growing faster than the market as we have done over several years that you can see very well from the chart.

The second of our key priorities is to execute the transformation plan for the U.K., which we set out last year. The backdrop for the transformation project has been a pretty stagnant heating market in the U.K. But despite branch closures, growth was stable and gross margin is a bit better actually than last year, partly due to product inflation in the early part of the year. Trading profit was slightly ahead, with Infrastructure, Pipe and Climate and soak.com, our B2C business, performing more strongly, offset though by continued weakness in the heating market in particular where market conditions remain very competitive.

Just a reminder of some of the key components of the transformation plan. The new customer proposition, that's based around 2 branch formats. Large destination branches, staffed by product specialists and stocking a very wide range of products across all major categories. Most of these branches will also do all outbound deliveries on behalf of the smaller local branches. The smaller local branches, they have a narrower range of specialist products, providing customers with a local service. We made good progress in the year. We closed 33 low-return branches, and there are about another 32 which will be closed this year. We will also fit out this year 25 more of those destination branches and continue with the local branch refurbishment program.

The U.K. transformation includes the redesign of our supply chain. And we've recently completed both the outsourcing of branch replenishment logistics, and now we're moving these to in-night that will enable orders to be picked and dispatched as soon as the branch opens the following morning, giving a significant service improvement. The consolidation of outbound deliveries to larger destination branches, that's underway. And later in the transformation project, we will reduce our distribution center capacity. These projects, they will improve our customer proposition, and they'll realign our cost base to make sure that we can focus our resources on valuable customer services.

We also aim to have the best-in-class e-commerce platform to serve both trade and retail customers. And we made excellent progress on this actually during the year. We drove up e-business sales 40%, self-service events up 60%, mobile sales up 150%. We're launching a new website at the moment, and there is new functionality coming this year, including live chat facilities to enable us to provide product advice in that way, quotation facility, electronic proof of delivery, prompts to identify products that our customers prefer and the benefits calculator. The adoption of e-commerce by our larger installers is very encouraging. They are in search of the most efficient and well-controlled way for them to execute their business.

And then our third priority was to address the strategy in the Nordics. The strategy was finished in the first half and is now being implemented. One element of that strategy was the turnaround of Finland, and that has been done really well, really strong recovery there in profitability. The branch estate has been rationalized, closing poor branches, enabling our teams to reallocate resources where we're most likely to win. Similarly, we sold our small DIY business in Denmark in August. That's allowing the team now to focus exclusively on the building materials business.

Secondly, trading momentum has been positive in the second half, with good growth, maintenance of gross margins and improved cost control to deliver strong trading profit growth in the second half of the year. Thirdly, the team have been working very hard on the vendor due diligence and all the other stuff that needs to be done to get the business ready for sale. The auction is underway, and we expect to agree a transaction now in the coming months.

Overall, I am very proud of the team in the Nordics for the substantial progress that we've made in the year. And I'm sure that will be reflected in the value that we receive for the business.

Finally, we'll touch on the state of the markets. Look, in the U.S., demand across both residential and commercial markets is good. And industrial markets recovered, the commodity deflation that we saw last year has really subsided. The Canadian market also recovered, with good conditions across most provinces. In the U.K., however, the heating market remains weak. Since year-end, in August and September, like-for-like growth has been about 6%, and our order books have continued to grow. We certainly expect to make more progress this financial year.

That's all from Mike and I at the moment, so thank you very much for that. Now we will take any questions that you have.

I've got sort of 2.5 questions. So the first one was just on U.S. operating leverage. I think it sort of returned to a little bit above 10% in the fourth quarter. I just want to get your kind of view, as we go into FY '18, what the underlying level there should be given what you're seeing on top line and cost, I guess? The second question is on the Nordics. Can you just remind us, the DIY business, is that kind of 10% of the company of the Nordics sold already? Are you disclosing how much you got for that? And then is there anything else we need to think about? I think you transferred some pension assets and a little bit of debt into that. So just anything you want to flag as we kind of frame our expectations for a potential purchase -- disposal price?

Okay. Let me take the first one, which I think is the question about the U.S. flowthrough in Q4 being good. You can do the math, so it was over 10%. We feel good about that. I think I would say, I mean just to back up from the question a touch. I wouldn't judge us on a quarter. I mean, clearly, quarterly reporting sort of forces us down that route. We don't actually run the business quarter-on-quarter. You should be delighted to know. And I think also, we're not embarrassed to invest in costs where it's appropriate to grow the business. So hence, I'll say quarter-on-quarter isn't actually everything. I think the long-term guidance that the group has always given and absolutely we stand by is that our flowthrough should be low double digit. There's no change to that. We guided in 2017 that we wouldn't be at that, but we did exit well. So as I say, we feel good about that. In terms of 2018, how do we think about that? I think you'll still see us invest in costs. I mean the U.S. for the whole year was about 6.5% flowthrough. And it will be somewhat better than that, but we will still invest in costs in the U.S. We'll invest in our e-commerce platforms, some marketing, our operating model, some of the issues John has just indeed covered are important for us to invest in to create that future growth. So whilst I wouldn't expect it to be at the 6.5% for this year, I also wouldn't expect it to be back at the long-term guidance but for the right reasons.

And your second question, Silvan, and we didn't disclose the consideration, but it is nominal. And it was a fairly modestly profitable business, let's put it that way. Regarding the rest of the assets and liabilities that will be disposed with the Nordics business, we'll go with all of its -- all of the assets and liability it needs to operate, which it has been using. The only exception being some surplus properties which we have separated. For example, those included in the Silvan business, so we will retain those and dispose those separately.

It's Olivia Peters from Berenberg. I just have 2 questions, please. Firstly, your acquisition run rate has been higher this year than it has been in the past. It looks like you've already been busy this year. And I was wondering whether you could provide some guidance on the size of the pipeline, particularly in the context of the Nordics disposal? And secondly, you've obviously gone some way to dispel some of the concerns around the competitive environment to the U.S. I was wondering if you have seen any particular change to that environment with the entry of Amazon into the B2B space?

Thanks for your questions. Again, let me take the first one on acquisitions. We use a lovely British word, that we have a reasonable pipeline. What does that mean? It means that we continue to be active in all areas. I think one never knows when acquisitions can be completed, because clearly, value is an important part to us. I think, importantly, we are looking at a whole range of acquisitions. I think the days of us building on relationships with plumbers and buying plumbing businesses with branches, whilst not gone, are certainly less, and therefore, our ability to look at other types of businesses and platforms and capabilities become increasingly important to us. It's therefore quite difficult to guide. I mean we always generally say we tend to think of $200 to $300, and that's probably going to be wrong. But if you want to think of that number, but they do come along like London buses, unfortunately, we are capable of coping with that. We had a strong balance sheet. I think at the end of your question, you also mentioned in relation to the Nordics. I mean again, just to go back to how we think about it, and that capital structure and the order of how we think of capital, the Nordics has no impact in terms of the order of that slide. We will invest our money into organic progressive dividends and then M&A, and then any surplus cash goes back. So I think we are -- we had a strong balance sheet, and we're capable of doing all of those items. And as you've seen today, we have some surplus cash, and therefore, we're repatriating that in the form of the buyback.

Olivia, thank you for the second question. I think there are a number of parts to that. The first thing is, if you separate out the B2C business, Build.com, and our other online businesses, those markets remain very competitive. I mean our key competitors in those markets are huge: Lowe's, Home Depot, Wayfair, Amazon, us. And the competition is just constant, and I don't think that's going to change. And we've done well in that. We've generated good growth. We pretty much -- the margins in the business are good. Again, with some of the similar strategies that you've seen us adopting around the rest of the folks in business as well. We leverage our network very well. We're very good in own label. So we've executed that business well. But it is a very -- the B2C space is very competitive today and will remain so. I think in the sort of the core business, the core Ferguson business, there's no clear change today. We've continued to take market share, and we're continuing to serve the customer very well. However, we do take the competitive landscape and any changes in that very, very seriously to see will those have an impact on us? And also, to see, well, what's happening with the other competition in the marketplace? Fine, we might be taking share, but there's somebody else in the space also taking share simultaneously. So we need to be very cognizant of that, and to have our strategies to make sure that we don't lose out in that, and that's part of what we were talking about today. But there are plenty of other things as well that we are doing. So we haven't seen any impact, as you can see, on the business so far, but we do take that very seriously. Okay?

Yves Bromehead from Exane. Just a few questions. The first one, if we look at what happened in the U.K. plumbing and heating online markets, which has clearly been a major disruptor for the majors, how should we think about the U.S.? Are there any structural regions where the U.S. can go like the U.K.? My second question would be on capital allocation again. Could you maybe specify which areas of growth are you seeing? And will you still continue to maybe do some bolt-on acquisitions in the MRO industry? And finally, one of your competitor has switched to a fixed pricing model in the U.S. Do you have any interest to do so? And if not, could you also talk more about why this wouldn't work for Ferguson?

Yes, sure. Great questions. Thank you. Look, I mean on the move online in the U.S., we absolutely -- we want to be absolutely at the forefront of that. We want the best technology in the industry, customer facing and the back-office technology as well to make sure that we're at the forefront of that. Because some of the stuff that we talked about today about customer wants, yes, that's fine. We still need to make sure that we integrate well with our customers wherever we can. That we provide them great solutions, and a lot of those will be technical solutions. So I think we absolutely want to be on the front foot on that. I would say, in the U.K., if you look, compared with other people in the core merchanting space, we've got excellent online, both B2C and B2B, excellent offerings. And I don't think the U.K. market has gone as far as it will do in that area, that we still -- we are still converting a lot of customers to online. One of the things I would say though, the large majority of our customers who are using the online channel are also using a number of other channels. If you look, almost all the customers that are big online are also using counter, they're also using inside outside sales, and sometimes even call center as well. So when you see the revenue breakdown from those customers, I don't think online fulfills all of their wants or is going to, in the very near term, fulfill all of their wants tomorrow. Does that make sense? I think to the second question, on Facilities Supply and acquisitions, we did a couple of acquisitions. As you know, this is a very new business for us. We're only sort of 2 or 3 years in. And we're about $500 million run rate now. The margins are okay, but I think we could do better. And we spent last year making sure that we embedded both the sales force and the final mile logistics. We got that right for the business. I think there's another year of doing that. Did we look at any of the larger M&A that was happening? Yes, we did, but we didn't feel that we could bring sufficient or generate sufficient synergies from those transactions, so we passed on the transactions that you've heard that were in the market last year. And that's absolutely fine. So I think in the short term, our team will stay very focused on making sure organically we grow a business that is -- that looks and feels like a Ferguson business with good margins, good net profitability as well. And if some acquisitions come along, then fine, but I don't want those to put off -- to deflect our team. Regarding -- your point about fixed price is very interesting. We do a lot of work. We have done a lot of work for some time to make sure that we are disciplined and structured in our pricing for our customers. I still feel that if you got a huge -- I can certainly think of one at the moment, we're working on quite a large sports facility. And those customers are going to want a different price for that project because it is a huge project. If a project is 1,000x the size of somebody presenting at a counter, they're just going to want a different price, it's totally different. So I don't think a single price fitting all of our customers is likely. But I do think it's got good legs at the everyday end of town. We are experimenting with some of those structures at the moment. We've certainly got one business. Actually, it's an acquisition where the proposition is a much more fixed-price proposition. That make sense?

Yes.

Phil Roseberg from Bernstein. Just a couple of questions, please. Could you tell us -- or could you tell us a little bit more about how the MRO business, sorry, Facilities Supply business is developing, please? You gave us a number, but how fast is it growing? Is it really penetration? Or is it -- or growth of the underlying market? And perhaps, you could just talk a little bit about where that's going and where the Industrials business is going? My second question is on your trading, August -- July and August, you are saying that organic growth is about 6%, whereas we've seen more like 7% or 8% on the like for likes now, maybe there's a difference between organic and like-for-like there in the second half of 2017. So what would explain that slight deceleration in the run rate?

Okay. Well, I'll take the first one, you can take the second one.

Okay. Yes.

Look, on the Facilities Supply, like I say, we've been trying to establish the business. That's very important for us. We don't want -- I know some people have a different approach, which is, let's go hell for leather for the topline and we'll tidy up afterwards on margin and all those types of things. It's just not the way we set out to do it, wanted to do it or do want to do it. It's very deliberate. We want to generate a really nice small business and grow it faster than the market, so that becomes really nice big business. Does that make sense? That's our strategy, and that's really what we spent some time doing. But be clear, the only reason for growing that business is -- and for entering that space as we did 2 or 3 years ago, firstly, we think we can be very good in this space, okay? We think we've got something very valuable to offer customers. Second is, it must grow -- we must be able to grow that business faster than the markets. That's the purpose of it. And also, we must be able to generate the appropriate returns. And as you've seen, a lot of people in that space have very strong returns on sales, and I wouldn't want for us to be the player that was just going in there on a primarily cost-driven strategy. We need to go into that market on a service-driven strategy. That was the whole sort of premise of what we were -- what we're doing. But it remains pretty early days. We are positive about it today, but we don't really know how big it can be for us. Okay?

Yes. So question was about the organic growth rate. I mean just to touch on organic, again, I know when companies change measures, there's always a natural tendency of humans to be deeply suspicious, and the numbers are very close.

It's just because you're Welsh.

The 6% growth is within 0.1%, so even in the first quarter and same for last year. The real reason is if you think of what we do as businesses now and how the business has changed, we open -- in a town, we might open a branch, we might close 2, we might put them together, we might expand the square footage, we might move some of the business to e-commerce. We were actually starting to split the data out actually just to get to like-for-like, and we don't run the business like that. So actually, given that the 2 measures are very close, and we were splitting data for an external purpose and not using it internally, it just didn't make any sense. It's just not how we run the business, but they are very close, is the point, okay? So the 6% is representative. Why is it different from the exit rates in terms of the math? I mean, I think, firstly, 6% is a good number. So again, we shouldn't be too embarrassed with the 6% number. And there's 2 major factors. And first, we've had some weather in the U.S. which John may want to expand on. And secondly, actually, the comps are much tougher this year than last year, so actually, both of those factors get us to about a 6% number, which is good. After that, there's very little that's noteworthy. I think, importantly, sentiment, we're still feeling pretty good about it. And if you want to touch on the weather portion.

Yes, sure. Weather, we think, is -- the weather cost us $30 million to $40 million in lost sales, so it's about 1% of that growth.

(inaudible) July and August?

August and September, okay? So it's deflated the 6%. The 6% would probably have been nearer 7% had it not been for about $30 million or $40 million of lost sales. Just whilst we're on the weather, you know we've historically tried to avoid talk about weather. It's been pretty lousy this year. And the most important thing is we had 1,600 of our associates that were affected by this. And it is heartbreaking, some of them have suffered terrible damage to their homes. I'm very proud though of the way the team reacts to this. The way we react to people and communities. We took a lot of equipment down. We took a lot of generators down, particularly into Texas first off, lot of generators, lot of pumps. We shipped massive pallets of water. And we made our facilities available both to the emergency authorities and also, in some instances, to the local community, so people could take shelter into them. So I am very proud of the way the team responded to the hurricanes. I do think it's testament to our business that we sat here talking about, well, even though, we've had 2 of the biggest hurricanes ever in U.S. history, we sat here with -- it has impacted sales by 1%, great, and that is because we're very widespread around the country. It's also because our teams absolutely work hard. We had 140 sites that were impacted. They were all -- I think we got pretty much every one, outside of Puerto Rico, back with power by the end of last week, but some of them have been without power for quite a long time. And we carry on, we carry on working. We find ways to get us -- to service our customers and to get products out there to customers, and that is a testament to our team and the business.

Howard Seymour from Numis. I've got 2, and then a sort of longer-term question. They're both on the U.K. First question is, really, how would you see the pricing environment going forward? Because, obviously, last year, the FX was a big and dramatic factor, and everybody seems to have pushed it through, but you do allude to competitive markets. There's obviously commodity price inflation gone through, so there's quite a lot of moving parts there, and obviously, that could impact gross margin. So thoughts on that first. And then, second, ex P&H. Obviously, the rest of the business is doing well. Just your thoughts on those businesses going forward, whether they are businesses you'd look to expand, maybe not short term, but medium term as a result of the success that you're seeing there? Final question is just actually on divisional.

Sorry, and that was on?

On -- in the U.K., sorry. So the ex P&H business is in the U.K., as you allude to, that they're actually doing well, and P&H obviously, you alluded to that the transformation going on. Final question just on really I suppose the U.S. The U.S. bigger part, becoming a bigger part. You do give us a revenue breakdown obviously on the different businesses. But do we start getting to a point where, as a one-line, it's worth expanding more? And giving us more in terms of those as potential divisions, given that that's how you're in the business. As I say, that's a more medium-term question perhaps.

Yes. No, you're right on pricing last year, Howard, that we -- because of essentially the sell-through of inventory that you've already bought, we did get a fill-up on the gross margin in the U.K. last year, so -- and that might account for most of the gross margin improvement that we had last year. So I would be quietly cautious about U.K. margins this year. But team wise, it's for us to guide that, sell our value and protect our margins. That's part of our job. That's what we absolutely have to do. Regarding acquisitions in the U.K., we're very clear over the last sort of 12, 18 months. We want the team really to stick to the knitting of executing the transformation. That is very important. I think, therefore, any acquisitions are likely to be capability. If there was something that would help us along the way, a capability acquisition, they tend to be quite small. I can't quite think of one but -- so I wouldn't say no, but neither should shareholders expect us to be deploying a lot of capital into the U.K.

And that was probably hard to tell (inaudible) organically if you'd look to grow those businesses outside of P&H?

Well, I think we've already got a very broad branch network. So I certainly wouldn't see us putting down a lot more real estate. We're taking -- we're contracting the branch network now. Now it is changing in size and shape somewhat because of the move of some of these destination branches. But I think we've got a ghost in the works. Come on, Mark, come up and do something with that thing. So I wouldn't say a lot more real estate. But could we invest in other sort of lines of inventory? Yes, that's quite possible. We should be looking at doing that anyway. You have to constantly be looking at have we got the right range, okay? And in the U.S., the short answer to your question is yes. Mike will get on with it. You didn't move your lips when you said that, Mike. But all gone.

Aynsley Lammin from Canaccord. Just 2 on the U.S., please. Firstly, you mentioned that price inflation is coming back in the U.S. Just wondered what your expectations are for FY '18? Is it 1%, 2%? And are you confident of passing it on into the market? And then secondly, you've obviously set out today you're confident you can continue to grow above the market in the U.S. Just wondered if you change your thoughts for what you're comfortable -- so on the margin, gross margin upside over the medium term in the U.S.? Is that getting a bit trickier? Or you still see some good upside there?

Okay. The short answer to the first question is, we think it will be about 1%, 0 to 1%, but nearer 1%. And yes, we do think we can continue to pass that through.

And the growth above the market, yes, I mean, we absolutely expect -- that is what our expectations are of our team to carry on growing above the market rate. That is a key indicator of health in our business. We absolutely need to continue doing that. Gross margins over the medium term, we've had -- and there's the chart that we put up before, showing the progressions of gross margins over a long period of time. There are plenty of levers that we can still pull to get there. As you know, our gross margins are, I think, in comparison with the likes of Grainger and HD Supply and Fastenal and all those types of people. Our gross margins are reasonably modest. But I do think we need to keep selling our value. We do need to keep finding ways. We need to keep finding the channels that the customer wants to use and pursuing that. And also pursuing the own label opportunity. I think we will put more resources behind own label now going forward. So I would certainly want to see continued discipline on the gross margin side. And what does that mean? It means defending and incrementally growing, that's the words we've used for years, and that's words I'd like to carry on using.

It's Paul Checketts from Barclays. I've got 3 as well, please. In terms of the outlook for the U.S., John, you do these surveys of your customers, which I know gives you some forward visibility, and you have the commercial order book. Can you give us an update on those 2 data points, please? The second question, it relates to the Waterworks business, and that's been a market where you and your largest rival have been quite disciplined and delivered good returns over time. It may be a bit early, but since the change in ownership, has there been any change in competitive behavior? And then the last one, Mike. On the cash side, net debt was GBP 280 million below where consensus was expecting. Can you go into a bit of detail in terms of what drove that performance? And whether or not there are any timing differences we should expect to unwind?

Yes. I mean the outlook in the U.S. from our customers, it is remarkably consistent, Paul. Our customers, when polled, still expect market growth in the 4% type area if you look. And you plot the chart over many months, yes, but it is remarkable how consistent their expectations are. And also, we polled -- we do sort of -- we do several different types of poll. One is, what do they expect market growth to be? And the other is just a straight, do they expect a growth or contraction in the market? The contraction in the market is only ever very low single digits, and it remains like that. So our customers are certainly still expecting to get decent growth in U.S. And our order books, they are growing absolutely commensurate with the type of growth that we've mentioned in the outlook and Mike's mentioned today. The order books continuing to grow nicely. Waterworks, no, no change yet in the behavior of our competitors, newly named competitors in the Waterworks space. And of course, if you look at the ownership, well, the ownership is -- they were part owners anyway of the former business, when it was in PE hands. So I'm not sure that we would expect a lot. I think between ourselves and them, we have both been very disciplined in this market for a considerable period of time. It's still very competitive, and there are still plenty of other players, because those 2 largest players have still only got 40-something percent in the market. So it's still very competitive, with plenty of other players locally. And you can see -- I think if you look at the discipline that we've applied this year, if you look at Waterworks, both for waste water and clean water, the put in place data is very weak in Waterworks. And I think our team has done a great job digging out some really good performance in that period.

Yes. And on the good cash performance, there's no real timing issues. I mean, again, just to put a little more flavor on it. We had a good working capital performance and a little bit lower CapEx. Those are the main differences to consensus. I think we've already guided to the FY '18 CapEx number. So whilst that was a little lighter due to timing, I think you never really ever catch those back up, they always sort of keep pushing to the right. So again, CapEx guidance was on the chart for '18. And in terms of the natural cycle, we're probably at the low point of the natural working capital cycle at our financial year-end. That's not because of sort of year-end balance sheet trickery. We actually go into our winter months and tend to consume working capital now through to about the half year. That's about 0.3, 0.4 of a turn. So if you take the 0.5 turn net debt EBITDA, you add back the buyback and the cash flows from the business on that working capital cycle, we're probably operating somewhere in the middle of that 1 to 2 cycle as we push through the winter northern hemisphere months.

It's Charlie Campbell. I've got 2 questions, please. The first question is on the buyback and whether that includes anything for Nordics? Or whether that's entirely backward looking? Whether you've already allowed for some receipts from that? And the second question is on the tax charge. If legislation were to come through in the U.S. to reduce the U.S. tax charge, would you change your arrangements to take advantage of that?

John can answer that.

The -- no is the answer to the first question. I mean, Nordics -- we'll deal with the Nordics as and when we get a deal agreed. And frankly, when we get the cash in the bank, the board will then convene and go through the normal process that I've outlaid in terms of our capital structure. That's clearly going to take some time. And whilst we believe we can get that deal at least agreed this calendar year, we'll wait till we've completed that process. And again, really just to reiterate, the buyback is surplus cash in our view that we don't have a need for either number 1, 2 or 3 on that waterfall chart, and therefore, it's surplus cash that needs to be repatriated, but completely independent of the Nordics. In terms of tax, fairly topical with Mr. Trump. I think the way -- we continue to monitor the tax environment. Clearly, as the legislation becomes a little clearer, I have to say it hasn't. I mean there's a lot of publicity in the last week. And there was a 9-page press release which we poured through. There's still very little detail actually in truth. The 2 big levers are the reduction in the headline rate, offset by how are you going to fund it? Through either interest deductibility or other means. How will those 2 interplay? Clearly, a reduction in the headline rate is good for us. How he funds it might be bad for us. How the relationship of those 2 work will determine how we continue to look at our tax arrangements. But no change at the moment. Switzerland is a good economic stable political base for us and is the right place for us to be.

John Messenger from Redburn. I'm calling it 3, if I could. First one is just, could you give us a bit of flavor on what happened in Blended Branches thinking of the North Central performance? So that 3.8 plays a 6.6. I didn't bring in the map from last year to think if it's a prior year comp issue. Was it management change? Was it just disruption around that business unit reconfiguration that you've been doing in Blended? So just to have some flavor on that if you could, please, and whether that's going to revert to the more normal picture in line with the rest of the group this year? And if you'd like to, a broad split of how those 4 regions split on sales, whether they're broadly 25 a piece would be useful as well? Then just on guidance for the year ahead. Can I understand, for the euro exposure, is Netherlands -- is it about 15% of the Canada and Europe business? Just to understand the scale of euro exposure we've got going forward. And on working capital, the guidance to 12% to 13%, if we think about what you've sold, Tobler plus Nordics were much lower working capital intensity businesses, you've obviously got the U.S., which is closer to a 17% working capital to sales number. Getting down to 12% to 13% for the growth this year, is that actually quite a stretch target you're setting yourselves in terms of what you're doing there? Finally, sorry, it's not 3. That 3.3 billion of e-commerce sales and 18.5 million service events, can I just check that if I walk away doing the maths, it's about $178 per transaction? And if we split that between the B2C and the B2B, does that make a huge difference to that number? Just to understand the scale of transaction size. Because it looks quite low. And obviously, the 1.1 billion which is being in B2C Build.com, which, I assume, is typical toilet or bathtub at a $75 to $140, but just to understand what is the driver in there?

Right. Let me try this. Look, Blended in North Central was lower because of the industrial sales that go through the -- or primarily, because of the industrial sales that go through Blended Branches in that region, which really was quite a drag certainly sort of 6, 9, 12 months ago. And we do feel positive now about the recovery. I feel very positive about the recovery. I was out there with the team earlier in the year at the time, it was hard work, and -- but they've stuck at it, dug in, and I feel now that we are getting our just desserts. I certainly would expect growth rates to return to the mix if that's right, John. And then sort of around the regions, look, the 2 largest regions are West and East, North and South Central are slightly smaller, and we'll follow up with that to give you a sort of a clearer view. Netherlands, I don't know what your percentage was, but it's EUR 200-something million of turnover.

Yes.

So working capital, you said working capital.

Yes. I think working capital, I think we're comfortable with the guidance of 12% to 13% as we move forward with the current shape of the business.

Okay. And then on the 3.3 billion, the 3.3 billion, the 18.5 million self-service events are unconnected to the 3.3 billion. Okay. So they are customers accessing their accounts, checking for proof of delivery, checking have they got the available credit, some of them settling their invoices that way, and that type of thing. So it's just an indicator to us of every one of those self-service events would otherwise have had to have been a telephone call or a visit or some other way of interacting -- that customer interacting with us. So we do feel that those self-service events, they both add value to the customer because the customer is self-selecting to do that. And they also add value to us because they lower our cost to serve.

Sorry. Just coming back on that then, do you have a feel in any metric as to what your average transaction or median transaction size is in the U.S.? Just when we're thinking about this whole world of B2B or what may evolve?

Average transaction size?

Yes. In terms of what your typical transaction (inaudible)

Well, the average order size is about $500 million to $600 million -- $500 or $600. I wish it was million dollars. Make life a bit easier. It's about $500, $600 typically, though it does depend partly on how the order is built, because if we have a very large project, that order may just be -- typically, there's, I don't know, anything between 5 and 10 lines on an order, but for the larger orders for the bids and tenders, there might be hundreds and hundreds of lines, and you are just putting those through because this is the order, this is the call off for this day, for example, or for this site. So it can be a little bit misleading that, John.

Clyde Lewis at Peel Hunt. Sorry, John, 2, if I may. One, following on a little bit from sort of John's questions there, and I suppose asking about the logistical side of things, I mean, again with the number of transactions and more online. Have you got the right sort of distribution center network and to handle the sort of ongoing shift to sort of more online transactions? Or do you need to sort of tweak that a little bit? Obviously, you've tweaked the U.K. sort of overnight deliveries and outsourcing the transportation there. Is that something you're starting to look at in the U.S. at all? It was the first question. And the second question was on acquisitions. Maybe it's just the mix of the businesses that you've bought, but they look to be very profitable. Is that, again, just purely timing on the sort of businesses you've got? Or is that an indication again, you still want to very much buy good businesses and you're not interested in turnaround situations at all? And again, explain your thinking there of what's happening on the acquisition sort of thought process in terms of sort of geographical in-fills or sort of product mix or again some turnaround opportunities.

Yes. Clyde, look, thank you. It's great question on the DC, the DC configuration. It's not just DCs, it's how we do final mile deliveries from things like I think some of you have been to the new ship hub in New Jersey and also the configuration of branches. And the answer is yes. We are reviewing those. Now we do constantly review because you're doing a review really by region, because it's such a huge geography that we're covering, so you need to look by region what is the most effective way of getting product to our customers without double handling product. You want to handle it as little as possible and get it to customers as quickly as possible and as cheaply as possible. So our logistics head in Ferguson Enterprises is absolutely all over that constantly, and -- but we are looking at that more. I think we've said over time, we -- you can't just sit there on a branch network, it is one of the reasons why Mike was talking about organic growth being better than like-for-like, you'll see it from our operating leases, we're not using lots more property than we were, but lots of people asked us 6, 7, 8 years ago, are you at capacity? The reality is, you want to use that real estate, you want the real estate to be as efficient as possible. You want to use as little as you can and get product through it as quickly as you can, and handle it as little as you can. So yes, that's a constant ongoing process. And I do think there will be changes in our configuration between distribution centers, shape-ups and some of those larger branches. I think there will be more changes in the years to come, yes. And I don't think it will be one answer, ta-da, let's spend $100 million, and this is the answer. I think it will be more evolutionary, because we have already been working. Like the shape-up in New Jersey, that was a consolidation of 4 sites, if you recall. And I think that's -- when you've got that and you've got it working and it takes quite a long time to get those things really efficient, you don't want to disrupt what is an effective supply chain. But in other places, there will be opportunities. And certainly, as leases come up as well and those types of things. And on your acquisition point, yes. I mean, we absolutely target good businesses. I think as well, over time, you've seen us target fewer, if I dare say, bricks and mortar acquisitions, and more now capability type of acquisitions, does this give us something that we want which is special and potentially a little bit different from what we are doing that we can leverage throughout our network. Okay?

Are we close to -- are we timed out now, Mark? Look, if there are any more questions, do call up Mike and I or Mark afterwards or later on today. But thank you all very much indeed for coming along.

Thank you.