Ferguson Enterprises Inc (FERG) 2018 Q4 法說會逐字稿

Good morning, everybody, and welcome. Welcome to our full year results presentation. You've got Mike and I presenting this morning. You've got our Chairman, Gareth Davis, he's not presenting, but he's here with us too, and Tessa is with us, somewhere in the audience as well. So nice to have some of the nonexecs along.

Look, from a performance perspective, our strong organic growth of 7.5% last year, that arose from a combination of good market conditions and continued outperformance across North America, particularly in the U.S. where we posted organic growth just shy of 10%, and we continued to take market share across the business.

We are very pleased with our gross margin performance, up 30 basis points over the year and ahead of our expectations. That really reflects 2 things. Firstly, it reflects our compelling value proposition, but it also reflects the ability of our sales associates to capture a fair share of the value that we add in the pricing to our customers.

Costs were in line, so trading profit was up nearly 15%, and our cash conversion was good despite some headwinds from tariffs in the second half.

Later on, Mike's going to explain the rationale for the rebasing of the dividend, which we grew 21%. This does reflect our confidence in the business going forward and our confidence in the long-term growth and profitable growth opportunities in the business.

You already know about the substantial capital returns that we made during the year, continuing our policy of returning surplus cash to shareholders and rewarding them for their continuing support of our company.

From a corporate perspective, we continued to focus both our management and our financial resources where we are best equipped to win over the long [term]. During the year, we successfully completed the exit of the Nordics and we returned the proceeds to shareholders.

We've also started to -- the process to sell Wasco in Holland. This is a really good business with excellent management, but we've got no route through to market leadership. We can generate better returns in North America.

During the year, we also got out of the wholesale business in the U.K., that just generated returns for shareholders, which were below our threshold.

The most significant progress, though, last year, it isn't in the P&L or the balance sheet, but it is in the continued strategic development of our business. It's that, that we're most proud of and that's what we're going to spend a little bit of time talking about today.

But first, Mike's going to take us through the operating and financial review.

Morning. So 2018 has been another good year for Ferguson. We've had revenue growth driven by the U.S. and Canadian businesses. We've delivered revenue of $20.8 billion.

Gross margin, 30 basis points ahead as we continue to deliver incremental year-on-year improvement.

Operating costs well controlled, and we achieved good flow through in the year.

Trading profit just over $1.5 billion, $200 million ahead of the prior year with a trading margin of 7.3%.

Headline EPS, up 21.4%. Net debt at the end of the year, a touch under $1.1 billion, and we've increased the dividend by 21%.

Getting into some of the detail of that, and you can see on Slide 7, revenue growth in the U.S. continued to improve through the year, supportive markets. We have some inflation in the U.S., that increased during the year. It was about 1% in Q1 growing to about 3.5% in Q4.

We presented the U.K. on a like-for-like basis on this slide to remove the impact of those branch closures and the exit of the low-margin business that John's just touched on, and that really helps to just provide a better view of the underlying business. And you can see on a like-for-like basis therefore, in the U.K., broadly flat for the year, pretty tough markets, inflation around 3% in the U.K.

Canada and Central Europe, revenue grew well, slightly lower level of growth in the second half as that laps tougher comps. Inflation in Canada, Central Europe around 2%.

And as John just mentioned, we initiated the process to sell Wasco, the remaining business in Central Europe. Just so we're really clear, given that decision was made after the balance sheet date, those numbers are included in the numbers that I present today. Clearly, the next set of numbers, the next time I talk to you, we will exclude Wasco and show it as a non-ongoing business.

So moving to the breakdown of revenue and trading profit. On the left, we've bridged the 10.1% revenue growth from the $18,845 million last year to the $20,752 million of this year. You can see the adjustment for foreign exchange of $229 million, giving constant currency growth of 8.8%. Acquisitions were 1.3% and therefore, the underlying -- the organic growth of our business at 7.5% for the group.

On the right-hand side, a similar chart bridges the $1,307 million of prior year to the $1,507 million just delivered. FX adding $7 million, acquisitions adding $8 million and the organic growth adding $185 million of trading profit.

So moving to the regional performance, and first our largest, the U.S.A., which delivered a great performance. We've continued to outgrow those supportive markets in all of our businesses to deliver good revenue growth.

Gross margins ahead due to improvements in procurement and disciplined pricing. And as we guided at the beginning of the year, labor cost inflation was 3% to 4%, operating expenses well controlled leading to good flow-through, slightly better than we guided at the beginning of the year.

Trading profit came at $1,406 million, $202 million ahead of the prior year, and trading margin of 8.4%, 40 basis points ahead of last year.

And you can see the breadth of that organic growth in the U.S. on Page 10. It was broadly based geographically and across all of our businesses. Blended Branches' growth across the country was good, as you can see in the chart and Waterworks continued to grow well.

Turning to the end markets in the U.S. We've shown the market growth and separately our organic growth here. Residential markets have continued to grow well driven by the strong growth in RMI, that represents the majority of our revenue.

Commercial growth has increased slightly towards the end of the year, and our growth has increased in line with that.

Infrastructure markets, also growing. We had a pickup towards the end of the year. And industrial markets continued to improve as the year progressed.

And overall, importantly, you can see that we've outgrown the market, again we've overperformed those markets by some 3% to 4% overall.

In the U.K., we are disappointed with the results. We've continued to execute the restructuring program against the backdrop of a tough market that's showing few signs of improvement. The restructuring actions will help us build a better business here though that will take some time, and John will cover more on the U.K. a little later in the presentation.

Revenue in the U.K. was lower at constant currency from the impact of those closures and the exit of a low-margin business that happened midway through the year.

Gross margins, broadly flat. Costs, a little lower, and therefore, trading profit of $73 million, some $29 million lower than last year on a constant currency basis.

In Canada and Central Europe, good a solid year of revenue and profit growth in good markets. All businesses generated good revenue growth with Industrial growing strongly.

Gross margins up on last year due to improved procurement and mix. Operating costs, well controlled. And we benefited from a one-off legal settlement here of about $6 million, which is in the numbers.

Trading profit was $83 million, $17 million ahead of last year on a constant currency basis and excluding that one-off gain.

On to Slide 14. During the year, our Swiss associate made a number of market announcements regarding difficult trading conditions, which generated a trigger for management to reassess the recoverability of our investment. We've assessed the carrying value of the investment and taken an impairment charge of $122 million.

Exceptional costs in line with expectations, totaling $82 million, most of those in the U.K. as expected.

Financing and tax on the next slide. Financing charges came in as expected, slightly lower than last year. This was in the main due to the lower level of average net debt through the year as, of course, we had the proceeds from the Nordics before we gave those back to shareholders. And tax was as expected with the ongoing effective tax rate of 25% for the full year, lower than last year, due to the reduction in the U.S. corporate tax rate.

Good cash generation continues to be a key strength of our business. Cash flow from operations of $1,323 million also includes an additional $99 million that we chose to put into the pension fund this year.

Interest and tax outflows, materially lower year-on-year, reflecting the reduction of the U.S. corporate tax rate and also the timing of some payments.

And capital investments picked back up to the level as we guided.

Good year of acquisitions. As guided at Q3, we closed a number of acquisitions in the final months, total 13 acquisitions in the year. And John will talk about the strategy behind a couple of those later on.

And the cash received from disposals, you can see on the slide, predominantly relates to the Nordics business.

Returns to the shareholders, just over $2 billion, through dividends and buybacks.

And we finished the year with net debt just [over] $1.1 billion.

So on Slide 17, that all means that we finished the year with a strong balance sheet, net debt-to-EBITDA of 0.6x.

Net pension liability of previous years has turned into an asset, that's mainly due to the contributions we put into the pension fund. And I've also included here operating lease commitments, remained pretty similar to the year before at $1.1 billion.

So looking ahead to next year we thought it would be helpful to give some guidance as usual. One fewer trading day, that's about $10 million worth of profit.

I've included the effect of the completed acquisitions, most of those are in the U.S.A. I've also included the details of Wasco there as well, so we can pull that out into non-ongoing.

U.K. exceptional costs I'd expect both income statement, exceptional costs and cash of about $30 million. Most of that will be in the first half of the year as we continue with the restructuring program.

And with the recent acquisitions and with the recent capital deployed, the average net debt will be higher this year, and I'd expect interest therefore to be nearer the $80 million mark.

Effective tax rate for FY '19, I'd expect to be between 22% and 23% as we get the full year benefit of that reduction in the U.S. corporate tax rate.

Due to the Swiss tax reform announced last week, we do expect the tax rates will push higher by about 3% to the mid-20s in the medium term. Timing is uncertain on that legislation, but it could be as early as FY '20.

Capital investment will be higher in FY '19 as we invest in new facilities, particularly a new distribution center in Perris, again more of which later.

And under working -- underlying working capital assumption, I don't see any change to normal absorption rates as we grow the business of around 12% to 13%.

So finally, I want to remind you of our capital allocation priorities. You can see that on the top half of the slide, and I've covered these in previous sessions, no change to our capital allocation policy. We continue to generate strong cash flow and the balance sheet remains strong. However, having reviewed previous cash generation and future projections, we have increased the level of dividend paid by rebasing upwards the dividend by 10% and then applying 10% growth to that. And that compounds to a 21% increase in the year.

So given our cash generation qualities, balancing the capital requirements of the business, we believe that, that rebasing is entirely appropriate and at this level entirely sustainable moving forward and also reflects our view of the ongoing strength of the underlying business. The board remains committed to a progressive dividend policy, and we expect to grow dividends through the cycle in line with long-term earnings growth.

So with that, let me wrap up. I'm very pleased with the 2018 results. Good earnings, strong cash flow and a strong balance sheet, and therefore, in good shape going into 2019. Thank you.

Thanks very much, Mike. Now these are the strategic priorities that we've set out before and we're going to focus on today, particularly on those strategies, which are -- which we're using to generate the best profitable growth in the U.S.

When I joined the company back in 2010, the group had more than 50 businesses across 20 countries. Now we're focused on 15 businesses across 3 countries, where we're well equipped to win and also to make the most attractive returns.

Upfront on this chart, just a reminder of the markets that we operate in, in the U.S. This chart shows our 9 strategic business units with our estimated market share in each one. We're the market leader in a number of these. Where we aren't the market leader, we've helpfully named them on those charts.

You can also see the other large competitors in the space. Those are in that mid-blue color with a number of large competitors. That's any competitor with, broadly speaking, more than 1% of market share. The message here, there is a lot of gray on this chart and that's because we generally operate in very fragmented markets.

Why does each of these businesses make sense to us? Well, firstly, from the circles on this chart, you can see the extent of the shared infrastructure between those 9 business units. Leveraging our assets across those business units generates very attractive financial returns.

Secondly, just down at the bottom, if you see our other large independent competitors operate across the first 6 of these businesses. That's because some of our customers also operate across some of those segments. And if we didn't operate in them, we would be at a competitive disadvantage.

Thirdly, all of these markets are attractive to us. We generate strong growth, [we took] market share in the year in each of these markets. We generate decent gross margins, good net margins and excellent returns on capital in each of these segments. That's good for our customers, it's good for our suppliers, it's good for our associates and it's also good for our shareholders.

Now with all the focus on financial results, we don't spend too much time with investors, with analysts, with yourselves, talking about some of the cultural aspects of our business, which really differentiate us in the marketplace, even though these things are very important, we showed on the chart last time.

Looking back over last year, last year was a year of significant change in the leadership of our business. After several years as COO of Ferguson Enterprises, it was Kevin Murphy's full year as the leader of the U.S. business. That handover from Frank Roach was seamless, you can tell that from the excellent financial results in the U.S., which the U.S. team has produced under Kevin's leadership. The whole of the U.S. team should be very proud of that. But just as significantly has been the progress in developing and implementing our operational strategies that has been truly outstanding.

In Canada, Kevin Fancey joined as MD of Canada. He's brought a really fresh perspective and a real operational focus to the Canadian business, which also had its best year ever.

And in March, Mark Higson joined as MD of Wolseley U.K. He's been very focused on getting clear accountability and driving availability and service, which are now improving rapidly.

We decided last year to relocate some of our support functions, the functional leadership of technology, of HR, of legal and compliance over in Virginia. And that's substantially improved the leverage that those functions have within our business, sharpened our focus on what's most important for our business.

Our strategic initiative in innovation and our renewed focus on own brand have been brought to life by allocating some of our most senior and best talented associates to those initiatives, both very significant commitments.

And in addition, we've brought more senior operational resource on to the Executive Committee from Ferguson Enterprises, really reflecting the shape of the group going forward.

All of those leaders now, they've been focused on making sure that their teams are well equipped and properly organized to drive our business over the coming years.

But what about the leadership in 10 or 20 years' time in our group? We recruited 2,500 associates last year. The recruitment, the training, the development of talented graduates has been a cornerstone of our culture since the foundation of Ferguson Enterprises.

This year, we're recruiting a further 600 graduates from some of the top universities in America. As they join our company, they get 5 months of specialist training in their chosen discipline in groups of about 15 in training centers around the country. And there they learn about our service culture, they learn about our sales process, they learn how to use our technology, they learn how to run our branches and showrooms.

Trainees are also supported by an assigned mentor. That mentor guides them and inspires them during that training program so that they can have maximum impact when they move into the field.

And when they're in the field, they can expect to move between inside and outside sales, between the counter, the warehouse, credit management, anywhere else in the business. Later on, many of them will pursue opportunities either in other business units or in other disciplines or geographies across the company.

Ferguson is a great place to develop a career in a service-oriented business with a passion to support our customers to grow profitably and the ambition to be #1 in our marketplace. Our culture and values are very attractive to bright, ambitious people who want to work in a customer-centric organization. That's why more than 7,500 graduates chose to join Ferguson and to develop their careers with us.

If you look at our latest associate survey, this gives a glimpse of the type of company that we are. Over 90% of our associates feel confident to recommend Ferguson to potential customers, and the overwhelming majority of our associates feel that Ferguson is a good company to work for. Now it's our job and our commitment to take the actions that move those ratings up even higher as we go forward and to make sure that the leadership lives up to the expectations of our associates as well as our customers and suppliers.

Now I'd like to touch on some of the other drivers of profitable growth today, which are particularly relevant right now. As Mike said, we've been pretty busy on acquisitions last year, particularly in Q4. Since then, we've done another $240 million of acquisitions across the group.

Going forward, we've got a number of pretty attractive acquisitions in the pipeline, several of those we expect to conclude later this year. They would add $300 million to $400 million to that total investment, and of course, further opportunities might arise going forward. That would bring, in the last 14 months, that $650 million, plus that $300 million or $400 million, that would bring us to $1 billion shortly later this year.

Most of the opportunities in the pipeline now are for bolt-ons that would expand our existing branch network.

Another part of our strategy is to accelerate penetration of own brand, products and categories. You might remember 2 years ago, we bought Signature Hardware. This is a high-end own brand bathroom business based in Cincinnati. We took the board there actually earlier in the summer. It was great to see the progress the business has made, particularly in making products available to distribute through our other channels, through the showrooms and also to our online customers.

And we've just done 2 other great acquisitions in the own brand space. SafeStep specializes in walk-in tubs and showers that provide easier access, often to customers with restricted mobility. So if any of you are interested, there are buying opportunities available. The business has a direct sales model that utilizes independent sales reps, which fits neatly with our ambition to leverage more of the rep community, the equipment installed by third-party installers, and that will extend our installation capabilities. We'll also leverage this through our showrooms, through our residential and commercial channels and our supply chain to generate synergies. All the manufacturing in the SafeStep business is contracted out onshore in the U.S.

Now Jones Stephens, we've just completed this acquisition. This supplies distributors and retailers with own brand residential and light industrial rough plumbing and some specialty plumbing products, both sourced in the U.S. and overseas. This business also has a network of independent reps. Both these businesses are very high-quality businesses with good margins and a strong track record of profitable growth.

Now we still expect the majority of our own brands' expansion to come from organic investment and that's particularly in the people needed to both design, source, QA, import, market, sell these products in our chosen categories.

And our own brand products, what do they do for us? They extend the range that we can offer to our customers, ensuring great value and great quality. It does take more work on our part and it also means that we have to make a larger investment in inventory.

On the slide here, you can see some of the own brands that we use in the U.S., but we could have included Frederick York or Meridian valves or soak or any one of a number of brands that we also use in Canada and the U.K.

Let me just touch on a couple of examples. FNW, which you can see there, this is a brand which focuses on commercial mechanical applications. It includes a range of valves, hangers, clamps, support systems, really recognized in the industry as quality products backed up by excellent technical and specification support.

PROFLO, which is up there on your right, this provides trade plumbers and builders with a wide range of quality fixtures, faucets, rough and specialty plumbing products, which represent really great value, particularly in the commercial space.

We plan to extend our lighting range and we'll develop categories that are underserved by suppliers or where there's insufficient choice for our customers, including groove fittings, push fittings, PVC fittings, fastenings, clips, hinges and also further expansion of our JanSan range of papers and lines.

Now in recent presentations, we focused on the opportunities to significantly expand our share in markets like New York and in adjacencies like Waterworks. I'm going to focus a little bit more today on another market, which is Miami. This is a huge market for us, the eighth largest metro area in the U.S. with growth both from immigration and migration from other cooler parts of the country. Local development -- developers, sorry, [have] got very ambitious plans here, both for commercial and for high-rise residential development in the downtown area. We already have an exceptional business here worth more than $400 million a year. And we have good market share in Waterworks, you can see it on the chart, in commercial, in showroom. But if we can move our residential trade to what we refer to as best in class, that's another $400 million opportunity.

Now in Miami, demand for luxury condos is growing very strongly. These projects are large. We're usually supporting general contractors, helping them to win in a competitive auction and then supplying them over quite long construction cycles.

These projects fit into this chart last time on customer wants in many places, let's just dig into the project support role. These large-scale projects, we don't just take orders and get the product out of the door as quickly as possible. We have specialist project managers. They're equipped with the right software to make sure that customers can control the call-off of orders throughout the project. We've got specific delivery and in-store managers making sure that all the various parts of the project are delivered at the right time and the right place on the site to minimize double handling for the customer.

Specialist contract administrators make sure that change orders, cancellations, returns are processed efficiently, they're billed accurately and also that the accounts are properly reconciled.

And all the tools, some of which you see on the chart, we share these collaboratively with the customer. It gives them the best visibility and the best service.

Now last year, we've also continued to drive e-commerce. This is now 23% of sales. We implemented new B2B platforms in the U.S., in Canada and the U.K. last year with no interruption to our service. That's enabled customers to enhance the -- to access enhanced functionality, some of which you can see on the slide. They demand, they need this more sophisticated functionality to add value to their business, and that's a key area of focus for the team. We're focused on driving, not just the transactional aspects of e-commerce, but improving the customer experience through the use of technology.

Now Mike reminded you of the investment priorities. The first and most important priority being reinvestment in organic growth. We've talked about investments in new associates and we've also made some substantial capital investments and capital commitments during the year. And just to give you a flavor of some of them, we have a 1-million square foot distribution center in Perris. I got a call earlier that said, are you going back into Paris? No, this is Perris, Southern California, okay, that's going to come onstream next year. That will serve all of our business units across the region.

In Baton Rouge, we're developing a 70,000-square foot facility to accommodate the strong growth in our Industrial markets.

In Holly Springs, North Carolina, we're building a 100,000-square foot primary ship hub servicing the branches in the Raleigh area. In Indianapolis, 120,000-square foot facility, and that's a ship hub which consolidates a number of other smaller units. Those 4 investments represent [$170 million] of investment. They include a number of hubs and that's important because this enables us to consolidate final mile delivery in metropolitan areas, giving customers the best access to the deepest range of inventory and also providing greater opportunities for efficiency in our distribution.

And through all of this, we continue to review the suitability of all of our sites. We actively look to relocate facilities where there are better sites available and also, of course, to support the future growth ambitions, wherever that's appropriate.

As we grow, we also continue to invest in working capital. This is needed to support our customers. We added $400 million during the year of additional inventory and receivables. Now clearly part of that is financed by payables, but we do have to make these investments as we go along.

A couple of years ago when we had headwinds from industrial slowdown in commodities, we were rather keen to get back to business as usual and get our growth rate back up. You can see now it's great to be back north of that 8% level, even if that was partly attributable in the second half of the year, both to some inflation and strong recovery of industrial markets.

Right, moving on to the U.K. As Mike said, firstly, we are disappointed, we're very disappointed in the financial results of the business last year. The results do reflect a difficult and very competitive underlying market. We made some good progress in some key areas, but there are a number of things, frankly, that we need to do much better.

Sign-on-glass technology has been implemented across the network, that is delivering results. Branch replenishment has been moved to in-night, that's a big investment, but that also will yield significant service benefits going forward.

The wholesale business has been closed. That was painful, but it was necessary. And we've significantly reduced head count in the support functions to reduce the cost base by $30 million.

In the second half, we recruited a new management team and that was to improve the execution, the pace and the focus of the business. They have reorganized their leadership team and created a regional structure to drive performance.

Some of the other valuable initiatives are in process, but frankly should have been completed before now. The range has been simplified and revised. Rebranding will be complete now in the first half. And we've piloted the destination branch format. We need to make sure now that those are going to yield the appropriate benefits before rolling those out.

We've introduced nondiscounted pricing, but there's a lot more work, frankly, to do in that area.

Most importantly though, Mark and the team, they are rebuilding availability and developing service levels.

So there are some important parts of the transformation now that are going to be complete this year, including the closure of excess DC capacity and the relocation of the U.K. support center in Leamington. Also improved pricing and rebate controls and implementing better demand management systems.

As Mike said, we do think that the central principles of the transformation plan remain valid, and they will lead to a more robust and better business.

As an aside in the U.K., the Infrastructure business and also soak U.K., those businesses have continued to do very well, increasing -- both growing and increasing profitability during the year.

Wolseley Canada had another great year, good growth in a supportive market and impressive gross margin expansion. We are pursuing some clear and very valuable strategies here, both to develop our service proposition and also to improve the quality and sustainability of the business.

We've got a new warehouse management system implemented in Montréal in the new DC there and improved demand management software that's continuing to drive availability. We've also got -- implemented new systems for rebate management and a new customer loyalty platform.

We joined the Octo buying group and that's enabled both benefits of scale and also further improvements in gross margins.

We invested in more resources to drive own brand sales, including a new sanitary brand and a new hand tools range.

And as I said before, the business also implemented a new e-commerce platform that's continued to expand usage, we've got an exit rate there of more than 15%.

And the team has also won and renewed some very important accounts during the year. The business now is better positioned than it's ever been to execute bolt-on acquisitions, and the team completed 3 smaller ones during the year, one since year-end.

Now on the innovation fronts. Our customers are facing today unprecedented challenges with the shortage of skilled trade professionals and also the need to improve productivity in the construction cycle. We created Ferguson Ventures to help us to discover, to invest in and partner with companies from start-up stage to accelerate the use of emerging technologies and new business models in our business. And the team is based on the West Coast. It's partnered with RocketSpace, which is a Silicon Valley accelerator, and that's brought some start-ups and us together in our chosen areas of focus. We've also created an innovation line, but the purpose of that is to explore industry changing technology and business models and to do specific trials within our business.

Ferguson Ventures, we've made our first investments, right? That includes, for example here on this chart, you can see a company that provides software and services in the BIM space. Yes, they've got a cloud-based solution and that assists mechanical, electrical plumbing professionals to develop workflow solutions to help them to plan, to collaborate, to order, fabricate and track jobs. It's very early days for Ferguson Ventures and also for our innovation, but we are learning what is out there and we will figure out how to capitalize on it.

Let me finish up with the outlook. Look, Mike showed the market growth in the U.S. over the last year. I'll just touch on what we're seeing right now. Regarding the residential market, new residential volumes are pretty steady and selling prices have risen. More importantly for us, the RMI market remains good with growth around 7%. Commercial markets ticked up a bit actually, over the second half of the year and so the full year growth rates were about 6%. And industrial markets also continued to grow strongly into the double digits in the second half of the year. The Canadian market also continued to grow well, slightly softer there towards the end of the year. In the U.K., the heating market remained pretty flat at best.

Let me also touch on tariffs. These originally targeted commodities and that put up the cost, for example, of imported steel pipe, domestic manufacturers absolutely followed suit. Since then, there have been 3 rounds of tariffs applied to finished products, the latest of which was introduced last week, that will have the widest impact.

The most significant impact initially so far has been on Canadian importers of U.S. manufactured goods because, of course, they -- essentially their supply chain is impacted by tariffs in 2 places.

So far, tariffs have had modest impact upon our customers and no material impact on our numbers. We've talked to our customers. We've let them know what's going on. We've told them we don't expect supply to be disrupted in any area. We do expect one or 2 prices to go up. You can get an idea of the magnitude of that from the data that we put into the appendix, which covers direct imports.

Regarding the impact on Ferguson. Look, we expect to recover increased input prices in our selling price. And today, we don't expect this to impact our P&L in any significant way.

Finally, look, the outlook. During September -- sorry, August and September, growth rates have been broadly in line with growth rates last year. August was a little bit higher. September was a little bit lower. Order books, they've continued to grow absolutely commensurate, with decent continued growth rates going forward in the coming months.

Thank you all very much for listening. Now Mike and I would be very happy to take all of your questions.

Howard Seymour from Numis. It's a couple really. I suppose one is partly on the tariffs, but you alluded to the fact that the Industrial has been strongly growing and also, price inflation's been strong. [To sum up] some of this is just sort of lapping what we've seen on the weakness over the past 2 years. As you look forward, when do the comps start getting tougher on that? Do you perceive that there's -- the sort of the growth in the Industrial, because you allude to the fact that it's actually accelerated, can continue, i.e., its underlying growth? And similarly on the tariffs, with the tariff position, does the price inflation remain at similar levels to where it is at the moment?

Thanks, Howard. On the Industrial side, we saw a tick-up in the market in the second half and also our growth rates. So our overall Industrial growth rate was 20%. If you look where that growth -- and sorry, that's in the stand-alone Industrial branches, which is 3/4 of the Industrial product that we sell. That growth came really from 3 areas. There were a couple of larger projects in there worth bottom line $5 million. There has been some decent growth in Texas, which I think you'd say was oil and gas related. That's probably about 1/3 of that growth. And the rest is more broadly across the Industrial customer base. Does that answer your question, Howard? Does that -- and I think it's not really until the second half this year that we will face sort of those comps. Go on. Sorry. Your second was on tariffs...

[It's really on spot] pricing. Because obviously what you've seen, the price recovery, oil related. There was an element of lapping on that, with the tariffs feeding through, do you perceive that price inflation will remain at the sort of levels that we're seeing at the moment?

More broadly, or for Industrial?

More broadly. Sorry...

Yes. And we've asked a lot of our suppliers what their intentions are with -- regarding tariffs. Now actually more modest than you would expect, there is still a lot of our product which is manufactured domestically. The large majority of our product is manufactured domestically in the U.S. There are some suppliers that are looking to put up prices higher than usual, but if you look at the -- if you look across the larger vendors, they're talking sort of 3%, 4%, 5% even when they have quite a lot of imported products. There are quite a few vendors who have no intention of doing anything unusual with pricing. So Mike, in terms of the overall -- do you want to just give a comment on the overall inflation, Mike?

Yes. I mean I think it was probably behind your question, Howard, which is we saw the second half inflation increase. And therefore, you'd probably see the harder comps come through in the second half, just building on what John said. So does that help?

Yes.

Aynsley Lammin from Canaccord. Just 2, please. I wondered if you could just give a bit more context around the absence of any share buyback or special dividends. Does that just reflect the fact that the pipeline on acquisitions is stronger? Is there an element of caution just where we are in the cycle? Just interested in your thoughts there. And then secondly, just on cost inflation, maybe the ease of finding kind of drivers and labor inflation rates in the U.S., wonder what your views are of the trends for the next 12 months.

Do you want to go?

I'll start. I'm sure John will interrupt, yes -- no. The -- interesting, your phrase of absence of buybacks when we've only just finished the last set, so I think we have -- we've absolutely delivered. We've got a very clear capital allocation policy. I think your question is probably relating to the net debt-EBITDA being at 0.6x at the end of the year. Is that correct? Yes. So if you just let me share how I think about that. If you add on the acquisitions that we've done since the year-end, that 0.6x, I'm sat here [at about] 0.8x. I've got a good pipeline of acquisitions ahead of ourselves. And of course, we always have our busy season of investment in working capital up to the sort of December, January. So I think I'll be sat here at the half year talking to you with a net debt-EBITDA of 1-point-something, somewhere between 1x and 1.5x. That's sort of how I tend to think of ourselves as being shaped today rather than the 0.6x that you might see in the accounts. That's absolutely within our range. I think also you've heard John talk about we have got something like $450 million of CapEx guidance, investing in the organic part of the business. That's what I call box #1 on our capital allocation. We've talked about the dividend already. So we're increasing the dividend. And the pipeline looks pretty good. We've just talked about that. So I think, with all that told, that really says that we always continue to monitor. None of those are mutually exclusive. As a board, we continually review, do we have surplus capital? And I think we've also got a record of demonstrating that when we believe that we do have surplus capital, we do get it back on a reasonably prompt basis. So again, I think we keep it front and center. I don't think you should be too worried that we're at 0.6x and under-levered. We've got good uses of that cash. And if that pipeline does dry up or we can't execute on it, clearly we'll continue to look through those -- through that waterfall, as we call it. Does that help?

Yes.

Okay. Cost inflation. Should I carry on? Cost inflation, I think it's pretty similar to last year. I think, labor, we'd expect to be, in the U.S., about 3% to 4%. And we have managed drivers very well actually. We -- some couple of years ago, brought a lot of our drivers in-house partly because we wanted to control those drivers and for health and safety reasons actually. As it happens in this recent period, that's actually benefited us too. So I think there's no change in our cost inflation base sort of '19 over '18. We'll clearly keep an eye on that, but as John says, whether it's tariffs or cost inflation, our job daily is to make sure that we're helping our customers win business and making sure we're passing-through those cost increases and helping our customers to do that as well with our service levels, okay?

It's Gregor Kuglitsch from UBS. Can I just come back on the acquisitions? I don't know if it's as simple as dividing roughly the [$650 million] by the 40 million to kind of get a sense of the multiples that you're paying. I'm probably not quite accurate, but if you can give us maybe some color on what kind of multiples you're paying, I guess, that's on a pre-synergy basis; and then how you think over time those multiples evolve as you integrate the bolt-ons. That's question number one. Question number two is on the flow-through rate, I guess overall, you've given some color on cost inflation. Obviously, last year was a good year. Any color you would like to provide for the year ahead would be helpful. And obviously, I guess it does depend a little bit on the level of growth as well, especially in the U.S. And I'll leave it there.

So I'll do the first one, Mike. You do the second one.

Yes, good.

I think, on the acquisitions, they really fall into 2 categories. There are -- and we're only talking about buying quality businesses, but it is important that we get them integrated. And those integration costs, we routinely -- as you know, in the U.S., we've always charged those directly to P&L and we get on with it. And there was one acquisition in the year which was sort of reasonably sizable which was not at that point profitable, but we were very, very positive about the synergies that we were going to generate from that business. Other than a sort of an outlier like that, the multiples haven't really moved very much. We are still paying normal multiples that we've paid over several years. And we expect to get benefit. Usually there are buying benefits for bolt-ons of a couple of percent on gross margin. And then we are more efficient on the back office end. So usually multiples are coming down by sort of 2 -- a multiple of 2 or 3x earnings within the first 12 months. That's pretty typical. But there's no change really overall on the multiples that we've paid for good-quality businesses.

And in terms of the flow-through, no. I mean, again, I think we have been consistent that in good markets we would expect the flow-through to be high single digit, whether that's 9%, 10% or 11%. There's no change to that guidance at all. So I think -- and certainly the notes I've seen this morning, I think, are expecting us to flow through at about 10% in good markets. So no change there.

It's Charlie Campbell from Liberum. I've got three. One of them -- the first one's quite quick really. Just following on the acquisitions, obviously a step-up in activity. Is that because vendors are becoming -- choosing to sell as it were, or you're looking harder? Is there an element of that there? The second question, I suppose, which may be related, just thinking about the U.S. residential RMI cycle. You've told us you're very confident in the strength of that but clearly mortgage rates rising and others perhaps less confident, so just wonder where the mortgage rate ties in with confidence on U.S. RMI? And then the third question, on the U.K. You've talked about another $30 million, I think, of restructuring this year, if I heard right. And just wondering what that is. Is that really further more branch closures? Should we be thinking of that when we're modeling the U.K. going forward?

Yes, thanks. Look, on the M&A, we have absolutely been looking hard and working hard and trying to find the acquisitions that we want to do. That's the key here. So there is part of that. Part of this is just -- what did you say last time? It's like buses. They come along in threes or whatever. There are sometimes even more, but -- so we've absolutely been working hard to find the acquisitions that we wanted to do, first point. There has been a step-up in opportunities. There's been a marked step-up, for example, in the Industrial space. You'll see we haven't really done a lot in there. We're very selective about what we're pursuing here, very selective. So whilst there is a step-up, it's a step-up that we absolutely want to do, we're in control of. This isn't just people putting their businesses for sale and, "Hey, let's buy anything in our space." It needs to fit culturally with our organization. It needs to be a quality business. People need to want to join. They need to want to be part of the Ferguson story, for example. All of those things are very important to us, having the right margins and the capability for us to add value through synergies as well. On the sort of RMI, I think, if you look at some of the lead indicators and, for example, LIRA, we still see that remaining a pretty positive indicator today. Clearly, if you look back, I remember, sort of 4 or 5 years ago, we said, well, if we're not going to get 10% growth in new build, how's the market going to carry on carrying and whatever else. And -- but I think that we've shown that in a market of 1.2 million or 1.3 million new starts in the U.S. we can do very well. So we don't need to see those new starts really stepping up. You can see new starts in the U.S. is about 70% of our business. Fine. That's good. It's good business. We like doing it. It's good margin. We can do it well. Absolutely our customers want the service, but it's not at levels that it was at a decade ago but prior to the -- prior to the financial crisis. I think the other sort of indicators in RMI, affordability, to us. When you look at the affordability levels, they still seem to be okay, actually close to the long-run average. And so most of those indicators, to us, still suggest continuing decent demand. And certainly they are suggestive of a market which we can continue to press on in and do well with. Mike, do you want to cover the...

Yes. In terms of the U.K., the -- I think, as I said, I'd expect all of those P&L and cash costs to be in the first half of the year. That's really the balance of the program that was announced a couple of years ago. The 3 main items in that are all public and are being worked on already, and it's really 3 main buckets. One is the rebranding and getting the sites under one brand and in a fit-for-purpose state with the new product range in them. The second one is the closure of the national distribution center up in Leamington Spa and the sale of that land up in Leamington Spa. That land is held in assets held for sale. And the third one is the continuing rollout of the IT system. Those are the 3 main buckets of which we've got left to complete by the end of the half year.

Chirag Vadhia, HSBC. Could you talk a little bit more about the investment in the organic expansion that you have, just some details on whether -- what the $400 million is going into in the inventory types? And then also a little bit perhaps on what sort of savings you see from any of the branch closes and where that's been spent into the expansion?

Yes. So I -- we got the chart with the 4 specific projects on. That's $170 million actually of the $400 million. And then there is a fairly normal mix of technology; refurbs, some new, for example, showrooms; and those types of investments. So I don't think there's anything out of the ordinary. It looks a little bit strange this year that it's sort of a little bit higher, but we were a bit lower last year. So I think we've just got -- and that is just because one or two of these are a bit lumpy, I'm afraid. If you look at the investments in working capital and it was just a reminder, our investment in working capital is absolutely proportionate really to the growth. We make incremental improvements, but it's really pretty proportional to the growth in the business. I think, going forward, there is a little bit more inventory required for our own brand investment, but from a big sweep of the -- of history in the balance sheet perspective it won't make any difference to the investment returns.

This is Karl Green from Crédit Suisse. Just a couple of questions on own brand, following on from that point. Can you indicate how fast it's growing overall, including the M&A; and also organically? I guess, thinking about the penetration as a proportion of overall sales, it's probably having to run quite hard to keep up with the good growth that the U.S. is seeing overall. So just some indication as to how that's performing. Because I'm wondering if it's had any obvious or notable impact on the gross profit margin or indeed the EBITDA margin. And then following on from that, just to your comment about most of the own brand manufacturing or contract manufacturing taking place in the U.S., are you minded at all to consider perhaps cheap M&A optionality overseas where there might be a discount available for the uncertainty around tariffs?

Yes. And yes, it's a great point about the growth. We did struggle last year actually to stay up with the growth, but we were putting resources in throughout last year for this initiative, which really if you look, it just takes time, frankly, to do all of the specification, the design work; to go out there, source product; do all the QA, all the [importation] stuff that you need. And then actually interesting, one of the things that we've learned along the way is you can't just land this product into a distribution center and think it's going to sell itself. Our vendors travel around all of our branches constantly, trying to excite our salespeople and our branch people to sell their products. And we have to do the same, slightly strangely, with our own product, just telling people, "Oh, here's a product. Please go and sell it." No, actually they need to believe this is a good-quality product with a good pricing point and it's suitable for this application in these circumstances. You've got to go and provide all the support that's needed to sell that into the business. But what I will tell you is my challenge to all of our teams is that I want us to get own brand growth at double the rate of growth of the business. We're not there yet, all right? Now what that would actually tell you, if you work the math back, with the acquisitions we've just done, I think we're at 8%, Mike. So it would tell you that we will gently drift up from 8% to 9%, to 10%. 1% broadly a year, I think, is the way it sort of broadly would work. I would love to see that. We didn't achieve that last year, but actually if you look back over 3 years, we went from 5.6%, I think, to 7%, now to 8%, so -- but it's still a relatively modest part of the business. It does -- it is accretive to gross margins, but of course, we have to do more work down beneath the gross margin line, all of that resource that we have to put in. We just have to do more work. There's a reason the margins are higher. Let's put it that way. Does that answer your first question? Look, on the second, yes, we have resources out in the Far East that are sourcing, actually not just one group, there's -- we've got them in slightly different places. And that's entirely supporting of the own brand that we import into the U.S., which is now running at $600 million, $700 million a year, but that's still -- there's still plenty of opportunity there. And I would still say, if you compare that to, for example, a big U.S. retail DIY chain, we have a long way to go. So I don't think I'm being unreasonable asking our teams to get there at double the growth rates. Let's put it that way. And yes, that'll be a mix of onshore and low-cost country. I think it will be more low-cost country.

Clyde Lewis at Peel Hunt. Three, if I may. One, I think in Canada you mentioned that you've joined a buying group, which surprised me a little bit. It's the first time I've heard a major, major, major materials' merchant joining a buying group, so can you just maybe explain the thinking behind that and obviously what the savings may be as well? The second was on facilities supply in the U.S., obviously low market share, a huge market. Can you maybe just sort of say a little bit more about the strategy of what you're hoping to do to try and grow that market share? And the last one was the U.K. You've announced obviously the plans to sell Wasco. U.K. looks increasingly like again, lost soul, and has it got future within the new Ferguson?

You've got to help me out there, Mike.

[Do I?]

[I wish I'd had the inflation work]. Yes, look, Octo, it was a -- it was very interesting. It came along as an opportunity. We talked to them over quite a considerable period of time. Their members originally had similar market share to us. We actually went through a clean room due diligence process so that there's no data leakage. So we got a third-party professional services firm to do all that. We liked the people, they were doing some sensible things, and we felt this was an eminently sensible thing to do. We do maintain -- if we can negotiate better, we still maintain the terms. So for example, we maintain our own payment terms, for example. And of course, if there is unbundling because we're going through a central distribution center rather than to branch, then we retain those benefits as well. But it just made sense. Interestingly, it wasn't the only time in the group that we joined a buying group because we did it in France a number of years ago when we owned a business in France, in the South, which we did for a while as well, just pooling our -- essentially pooling our buying resources with other people. So it made sense. It gives us economic advantage, and we will see how it goes. We don't have a lifetime's commitment to this. Our commitment is really -- and their commitment as well is, yes, it works whilst it works. And today, it works. So I'm very pleased with the team for being imaginative and also for implementing because it clearly had a favorable impact on our business last year. Facilities supply, business did really well actually last year. Very pleased. So last year, when we sat here, I said the focus at that time was to -- was 100% organic last year to make sure that we could mold the business, mold what we've got. We've done 2 earlier smaller acquisitions. We need to make sure that those were servicing well and also that we were focused on improving the gross margin of what we've got. That really meant selling the right mix of products. And I'm really pleased with the team this year. We did -- we ended the year at $550 million, so it's good growth; grew even faster than the rest of Ferguson, which was great; did exactly what they were meant to do with the gross margin. And just very, very pleased with the performance of bringing the gross margins up. That was important. And this is a nice, decently profitable business. It's not quite at the -- our average margin yet, but I'm pretty sure it will get there. So continuing to make good progress there. And I think the key there is to make sure that you're -- you mean something to the group that you're addressing. So for example, if we're selling to multifamily, to multi-occupancy homes, or if we're selling to government or hospitality, to the hotel chains, to make sure that you tailor your offering really well and you serve those customers really well, that's the key, I think, in that space. The U.K., look, today, this is the way that we see it. We've got a strategy that we believe is going to deliver us a better business. We need to execute that strategy. Today, I do feel good with the management changes that we made during the year. I feel very good about that. The team are driving absolutely the right things, driving in availability and driving service. That's what we get paid for. If we continue to make the progress that we're making now on that, I feel very positive. And yes -- and we need to achieve that. Because you saw the results last year. The results are not acceptable. But we're going to keep the business. We're going to grow the business. We're going to develop the business. We're going to develop its service. That's the way to grow the business, service upwards, all right?

John Messenger from Redburn. Three, if I could. First, could you just give us a bit of flavor on how Build.com has done in overall terms, John? And are you happy with kind of that 13% organic growth? It kind of -- it's not that different to the rest of the division, I guess. Is -- just to understand if that's something that you're comfortable with and for that business unit. And if I'm right, does it need to get bigger and broader quicker, I guess, is my question, particularly given the costs of pay per view and the rest of it that goes with that business unit. So -- and is its profitability broadly in line at margin with the rest of the U.S.? Is it -- or is it better or worse? The second one was just on obviously the M&A. We can see from the numbers that your kind of pretax return on what you spent in '17, in the first full year, was about an 11% pretax return. Historically you've shot for a 15% number. Clearly, we're in a low inflation, a low rate world. Is double digit or 11%, 12% the right kind of number in terms of hurdle that you're using in reality today? And the final one, just its domicile and its listing. And sorry to come back to it, but on the domicile point, given the tax changes, would it make sense to redomicile back to the U.K. or jump and go straight to the U.S.? And secondly, on the listing, is the board at least going to actually be in a position maybe to move quicker, in that obviously politics is changing? Brexit risks are there, but if the lunatics take over the asylum, shouldn't you be ready or maybe move in advance of that given what we heard about over last couple of weeks? So if you wait too long, is there not a logic here rather than ending up giving 10% of the share base away, for example, to share to the employees or to the government, in reality, should you not move and make preparations?

Right, yes, got those. Yes, Build, let's start with Build. Look, am I pleased with 13% growth? I'd like more growth. It's not my nature to be either patient or tolerant, as you know, so I'd like a stronger growth rate. But here's the thing -- and Mike, myself, Kevin, the rest of the team, we absolutely -- we want to grow a -- we've always said it is profitable growth that we want. We don't want the other type, all right? Today, I think we have a decent -- we have a good business which is differentiated from the other operators in that space. And it's had good -- it's had good, double-digit growth for a long time, but it is important that we maintain the profitability from that business, okay? You asked a question about its margin. Actually, gross margins are slightly lower than the business, not a long way off but they are slightly lower. Net margins are also slightly lower but not a long way off, okay? So I think it's important for us that we have the same -- we apply the same principles to Build.com and the other B2C businesses that we have for the rest of the business. I don't think it needs to be. I don't think it needs to sort of do something dramatic scale-wise to be a sensible business for us. If you go back to why we acquired the business and why we have grown it since, we did that because it's synergistic with the business. We use our distribution centers. We use our access to product. We use sort of our back office too. So that's, yes, it does not need to be the size of Amazon or Wayfair or whatever else. And it definitely doesn't need to burn that type of expense. The key to us is to be differentiated, I think, because otherwise if you are just bidding on search terms forever, those search terms get more expensive over time. We've seen that. We know that. And so we need to be smarter than that. Remember we do have call centers, so -- and we do also have quite a lot of repeat custom from trade buyers in that space. I think both of those things are cause for optimism that we can continue to make a good return from that part of the business. Does that cover off your Build.com question, John? Is that okay? Yes. M&A, Mike, do you want to cover the hurdle rate? Or...

I thought you were going to give me lunatics and asylum.

Actually, yes. I'll do the hurdle rates and...

No, the metrics for us haven't changed at all, John. Again, we do have -- I think John mentioned, we do have some first-year integration costs on some of the acquisitions, not all. It tends to depend on the type of acquisition. But no. I mean we always say sort of 15% in second year. And the ones that we have recently done, I'd expect those to absolutely deliver that, if not some more. So no change to the metrics or our thinking; or the multiples, going back to the last -- to the previous question, either.

When you think of the -- I -- the way in which I always think of the 15% is, as we talked before about the turns of synergies that you get, if we get 3 turns of synergies, 15% is 6 -- just over 6x. You get 3 turns of synergies. It -- you can sort of get back to the types of multiples that are normal for good-quality businesses. Does that make sense?

Yes -- no absolutely. And the lunatics.

Well, you do the domicile...

Let me do the domicile. And you can do listing and lunatics. The tax domicile, again just to go back on Switzerland because I'm sure most of you aren't plugged into Swiss parliament and tax. So last Friday, the government passed a legislation and on a whole range of Swiss tax measures that they would like to enact. In Switzerland, they have a 100 days for the public to get enough signatures if they want to take it to a public vote. That public vote, if they get enough signatures, will go to a public vote in May, and they will either accept or reject. If it doesn't go to a public vote, then the act will pass. As with most tax legislation, it's unclear when it's likely to be enacted, which is why I've guided to FY '20. It certainly won't come in before our FY '20 year, is our belief, it could be later. And I think that will add about 3% to our tax rate as we go into the out-years. And I think, as before, John, there's really no change, but clearly it's higher up the list. And we continue to keep our tax domiciles sort of up front and center to see where else provides us with stability, both politically and economically. Switzerland's been very good to us. Clearly, we'll continue to put that higher up the list given the recent changes. So I think the U.S. is unlikely to work. I think there are other jurisdictions that we'll continue to look at, okay?

Go on. And then the lunatics and the asylum, were you talking about the Birmingham or the Manchester mob? Which...

I'm referring to both. Both [individually].

[Don't go there].

But more in terms of obviously shareholding and ownership and the various...

Look, John, I'm not sure that anything which has happened sort of politically in the recent past should color our view or will color our view over the short term. I definitely wouldn't like to be making headlines on that one. Any others?

There's one there.

One other, and then we'll pack up.

Ami Galla from Citi. Just 2 questions from me. First one, a clarification on your guidance on the operating profit drop-through in the U.S. Is this the underlying flow-through that you're talking about, or would this include the acquisitions that you've made? And which -- also a follow-up question. Is your underlying drop-through actually much higher than the 10% level that we're talking about? My second question is really on the competitive side in the U.S. I mean we've always talked about how the market is fragmented, but the competition is also quite tough. Home Depot rolling out next-day delivery across 35 metropolitan cities, it grabs headlines. To what extent does this impact your business on an ongoing basis?

Yes. So on the flow-through, we always generally guide overall. Of course, that's never quite right because it sort of depends on the types of acquisitions that we do. You've heard us do some own brand, but clearly if we do some bolt-on classic bricks-and-mortar, it does slightly change because on some you tend to have more first-year costs than others. So I think overall is the best guidance. We tend to think of around 10% for both last year and the year ahead of us. You do the second one?

Yes. I mean the -- you saw on the chart that, of the 9 business units there, Home Depot was really competing with the residential trade column on the left, which is our counter business, okay? That's where they compete; and then a little a bit in the -- on the B2C side, which is the one on the far right. Not really in areas like Waterworks or HVAC, they're rather specialist. I think we -- with all of our competitors -- and by the way, Home Depot has always been -- Home Depot and Lowe's are there as competitors in that bar and have been for a generation, okay, so there's nothing new or significantly changing about that. We have to absolutely stay ahead of the game. Our -- we have to offer the best service. If our service isn't as good as Home Depot's, we deserve to die at their hands, yes? So the only way -- we don't have a right to exist. Every day -- we don't have any contracted business. We haven't got any contractual protection for that business, every day whether somebody goes right to Home Depot or left to Ferguson depends on us and our service. What I would say, with things like delivery, we already do -- a phenomenal amount of our delivery is either next day or same day. We do a lot of same-day deliveries, okay? There are lots. I don't know whether you saw the spider chart last time we put up. There are lots of attributes to our service that are not very easily replicatable. Just a little example: When I go to our branches, our customers have almost always got a mobile number of our associates, someone who can go and open the branch out of hours. I don't see that in my local Tesco. It just doesn't happen. When they close their doors, they close their doors and that's gone. 20% of our product is noninventory products that we access for people. We find for them. Again, that just doesn't happen in a usual sort of retail environment, those types of things, the support with bidding and tendering. Over half of our business is bid and tendered. It's already highly competitive. Those bids are going out to, I don't know, sometimes a dozen different supply houses. So all of those things, we have to be really good at servicing the customers in those ways and many, many more to make sure that we stay ahead of the competition. Are we blasé? Absolutely not. We truly have to be better than the local competition, whether that's Home Depot or whether it's someone whose name you've never heard as a local -- as a small local independent. They can both be very good, so we just have to make sure that we've got the right service for our customers, okay? All right, well we'll call it a day there. Thank you all very much indeed for coming along this morning.

Thank you.