DCC plc (DCC) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. Thank you so much for joining myself and Conor here this afternoon. We welcome you on lots of different platforms, LinkedIn and a variety of different Zooms and stuff. So we really appreciate you coming to listen to us. My name is Eavan Gannon. I'm from Powerscourt, and I'm joined this afternoon by the man of the hour, Conor Costigan.

Hi, Eavan. Delighted to be here.

Excellent. Looking forward to this. This is meant to be obviously a chat between myself and Conor, but we will welcome all opportunities from the floor. So please -- you've got some details probably in front of you there, [email protected] welcoming any questions throughout the course of the hour conversation we're having here. And for those of you who are social media savvy, please feel free #DCCHealthcare and #DCCEvent, and we look forward to seeing your tags over the course of the afternoon. And without further ado, I would like to introduce, as I said, the man of the hour, Conor. Thank you very much for taking the time. And you joined DCC in 1997. You've had considerable experience. You've worked in a variety of different areas, starting out in Food & Beverage. I first got to know you at Investor Relations. So we've worked alongside each other for many years. And you joined the Healthcare division in 2003 before taking the helm in 2006. You've had a few busy years.

And if I'm not mistaken, 20 -- 2006 when you took the helm, revenues were approximately GBP 100 million. Would you like to take us through the transformation that you've led the way on?

Yes. I suppose it's been a fantastic growth journey, and we've -- as you say, in 2006, we had revenues in euros, obviously, in those days of about GBP 110 million profits of GBP 12 million. I think we had about 700 people in 2 countries, Britain and Ireland. And I suppose in our latest fiscal year, we had revenues of GBP 655 million, profits of GBP 82 million. We've got 2,800 colleagues now and operations obviously in Britain and Ireland, but also in Continental Europe and in the U.S. So it's been a very exciting journey, and we still feel like we're only getting going. We've got exciting growth platforms now in the DACH countries and in the U.S. So lots to go for still in DCC Healthcare.

Fantastic. Well, impressive journey so far. You might give us a little bit of a deeper dive into the 2 divisions. So we all know DCC Healthcare, but it's made up of the DCC Vital and the DCC Health & Beauty Solutions, you might give a little -- the audience and myself a little bit of a further dive into those.

Yes, sure. So the larger of the 2 businesses last year just slightly was DCC Health & Beauty Solutions. That's a contract manufacturing business, a CMO business, serving the health and beauty industry focused on nutritional products and beauty products. We provide a range of outsourced services from product development, formulation, regulatory services through to obviously manufacturing and packing. And our customer base is leading brand owners in the health and beauty space, big consumer health care businesses.

Any we know?

We have lots that you know, lots that you know all right, a lot of household names, international and local champions as well in the U.S., Europe, across -- and Britain. Direct sales organizations are important specialist retailers. And then on the -- so we have 8 manufacturing facilities, high-quality facilities, 5 in Britain and 3 now in the U.S. And I suppose one of the key features of the business is we really build long-term relationships with our customers. We try to lead out on product development and product innovation and through that, create very sticky long-term relationships. On the other side, it has DCC Vital is focused on medical products. So it's involved in the manufacturing, marketing, sales, distribution of medical products in the British, Irish and now the DACH market. We're also selling through international distributors. We have -- we're selling into the acute care of the hospital sector, which would have been the origins of the business. But today, we have a very broad reach, very strong presence in primary care, both in Britain and now in Germany, leadership positions and into other fragmented health care settings as well. And that's obviously a big growth area for us as well.

Excellent. Excellent. With talking of health care and the last 18 months, maybe you could give us some further information as how the divisions have coped both your staff and products and those relationships and how you've had have to deal with everything that was turned out to you over the course of the last 18 months?

Yes. Look, I mean, obviously, for the whole world, it's been a challenging 18 months, and it's been a very successful period for DCC Healthcare, but a very challenging period. And we're hugely proud and grateful to all of our colleagues around the business for their commitment. I suppose we learned a new kind of phrase through the pandemic, which -- when people talked about essential products and services and we do in DCC Healthcare and indeed in the DCC generally is we provide essential products and services. So whether that's the medical products to keep hospitals and GPs running from PPE to ICU devices or on the health and beauty side, the nutrition products that people are really -- the consumption of which really shot up through COVID as people really proactively sought to keep themselves fit and well. And so I suppose we didn't -- it wasn't an option for us to ask people to work from home. We had to keep factories going. We have to keep warehouses going.

Additional pressures obviously that you had to avoid.

Exactly. I suppose our #1 priority, our #1 value in DCC is safety. And our #1 priority was keeping our people safe. So we have to, first and foremost, implement new procedures to make sure we kept people safe in the workplace and then to operate under those new regimes while coping with increased demand supply chain challenges and everything that's gone with the last kind of 18 months. But as people will have seen in our results last year, when we grew our profits by 35%, we overcame all those challenges. All the 2,800 people that ran the business, overcame those challenges and delivered a fantastic performance.

Excellent. Well, on behalf of all of us, thank you because you are the ones who are helping to keep the health care systems going. And just a reminder to the audience, please do feel free to drop questions into [email protected] at any stage. We will take them over the course of the discussion or indeed at the end. And just coming back to you there, you mentioned the reporting structure. And as you said, you were locked down in Dublin and your teams were all working. How is that, that relationship with you and the management teams and all of the different businesses? How does that work, particularly when you're sort of locked away from each other?

Yes, the way we're set up in DCC Healthcare, it's the same really with the DCC Group head office team, if you like. We have a very lean corporate and divisional team across the group. DCC Healthcare is no different. And although we are expanding our small Healthcare team from 2 to 4 over the next couple of months really reflecting the scale of the business today and also our ambition for international growth. We're very fortunate, and we have -- that we have very experienced leaders in both the Health & Beauty business and in Vital. Stephen O'Connor leads the Health & Beauty business. He's been with the group almost as long as me, and we've worked kind of side by side to really build that business over the last 20-odd years. And then harry Keenan Leads the Vital business. Harry is a hugely experienced medical device and health care professional. He led the Baxter business in Britain and Ireland for many years and joined us about 6 years ago. And we're -- one of the features of DCC, as you all know, Eavan, is we've very stable teams throughout our business. So I suppose the transition to operating virtually with those teams was relatively straightforward. We know each other well. We have a rhythm in terms of how we communicate. It was a little more challenging with our more recent colleagues in the U.S. And in fact, it's interesting Amerilab, our most recent acquisition in the U.S., we completed on the 25th of March 2020 and then obviously headed into the pandemic. And we -- unfortunately, we haven't been able to be physically in the business since. But we've really built the relationships virtually since then. We obviously spent a lot of time in the business through the due diligence process and performing very strong relationships, and that really stalled us and goes through the virtual period, but very much looking forward to...

I was just going to say, are you looking forward to getting back out there? Are you rushing to jump on a plane?

Yes. No, absolutely. And I'd be in the states next month and really looking forward to getting around the businesses and seeing -- we've been spending money in all our facilities, so as well investing to develop capacity and capabilities. So looking forward to getting out and seeing our colleagues and seeing the development.

Travel safely. You mentioned the relationships with your clients and sticky and how it is that you develop products and innovation and things like that. Could you take us through that process and how that's opened opportunities, so the relationship has evolved over time?

Yes. Maybe starting with Health & Beauty, I suppose our focus really in this area is to build long-term relationships where we -- partnership relationships with brand owners. And as I said earlier, we lead out some product development. So we have about 170 scientists around the Health & Beauty Group involved in our new product development and our quality teams. And that's very important to our customers and our prospective customers. So we're constantly scanning the market for trends. We're constantly looking for new ingredients, coming through new uses of ingredients. And then we are coming back proactively to our customers to potential customers with ideas for new products. So that part of our operation is very important. Clearly, we're operating at the upper end of the quality spectrum, very well-invested facilities being part of the DCC Group and having access to the balance sheet is important to keep that investment going in the facilities, and our customers really value that. And then obviously you've got to provide very good service levels. You need the flexibility to be able to respond to customers because demand patterns aren't always uniform. So we work very hard to try and keep that flexibility in our operations and be able to be responsive. So I suppose the combination of those things really drives these long-term sticky partnership relationships.

Yes. And has that been tested in any way in the last 18 months? Or is that just a little bit more of the same, just having to be a little bit more front and center on Teams or Zooms call or something like that?

Yes. No, I think, certainly, it's been tested. I think for all manufacturers, it's been a challenging period. The demand for nutrition products was particularly strong.

Probably everybody on the call here has boxes of tablets that they will take every morning now that we might never have been looking at before. It's definitely an increasing space.

It is. Well, I mean, historically, the market over the last kind of 10 years or so has grown maybe 7%, 8% per annum. It grew in the U.S. last year by 14%.

So it's not just me.

Consumer penetration has increased. More people are taking it, and that bodes very well for the long-term prospects for the market. And I think going back to your question, we -- I think we coped with those -- that demand, that pressure better than others. I think we had capacity. We were able to turn on capacity. And the stability and the commitment of our labor forces and the robustness of our supply chain really helped us to maintain service levels at a very good level through that difficult period.

Excellent. Well done. We might take a little bit of time to talk about the platform from here. And you've spoken about lots of opportunities, your relationships and talking about the process of what seems to be a good platform for organic growth as you have the relationships, you're able to build things out. Could you take us through how you see that, how you see the opportunities there?

Yes, I suppose the great thing -- the starting point really -- and the great thing for DCC Healthcare is we're operating in growth markets. So whether it's nutrition market, the beauty market, medical products market, demand is growing for our products, and that's driven by really long-term macro factors. There's obviously demographic factors, aging populations, higher incidence of illness which is driving people to look for more cost-effective health solutions, driving them to look for more kind of preventative self-care. And I suppose through COVID, some of those things have really been accelerated or underpinned as well. So there's some fairly nice kind of underlying trends that benefit us right across in our nutrition and medical products. We're also seeing increasing regulation and increasing regulatory oversight. That's good news for well set up, well-invested, well-resourced businesses like ours. And that, again, is -- we're benefiting from that. The nutrition space, there's some interesting trends that are beneficial as well. There's increasing scientific support for the use of nutritional supplements. And I suppose that's probably been a key factor in some of the large consumer health care and consumer product businesses getting involved in the nutrition space. And there's been some significant investment by the likes of Nestle, P&G, Procter & Gamble in the space. I think Nestle alone has deployed about $10 billion over the last 5 years in buying nutritional brands. So that's shifting standards in the sector, shifting consumer penetration as well. And I think all of those trends will also feed into more opportunity for better resource, bigger players like DCC Health & Beauty Solutions.

Fantastic. Excellent. And again, just reminding you if anybody wants to drop some questions in as we go along. Otherwise, we can take them at the end of the session. You mentioned there CapEx and taking -- is there -- are there any examples of monies being put to work within the business and how it has been fruitful as I...

Yes. No, we've -- I mean the biggest project we've done from a capital investment point of view over the last couple of years is an almost doubling of our soft-gel capacity in our British soft-gel plant that came on stream last year, and that's been fantastic in terms of -- we've had some very interesting technological developments in that business. We've really developed our expertise in vegetarian soft-gel capsules, which is quite a growth trend, the whole vegan piece. And we've also produced the world's first, we believe, organic vegetarian capsule. And so -- and we've a number of other technological developments. So having that additional capacity allows us now to really go and exploit those.

That innovation and technology, is there opportunities to roll it out elsewhere? Obviously organic and vegan...

Yes. I mean we've -- parallel projects now going in gummies. So we're about to commission a new gummy line in -- actually in our soft-gel plant in Britain, which will allow us to enter the gummy market in Europe. I suppose gummies has been one of the fastest-growing sectors in the U.S. over the last 10 years and really started off as a kid's product. Those kids became adults and continue to take gummy vitamins. And that's obviously grown the market substantially, and all the forecasts would suggest that's going to continue. So we're -- it's less developed in Europe. So we're putting in the investment now and getting going as that market begins to evolve. We already have customers lined up for that. And we're also -- we're producing gummies in the modest way in the U.S. today, but we're developing at a much more substantial investment project to increase our gummy capacity, and that should come online over the next 12 months, and there's a range. We're constantly embedded. I mean it's one of the features of the business in Health & Beauty is we're constantly investing in capacity, capability. And then obviously, the key thing is really cross selling that capability across our customer base.

Great. Excellent. Well, you obviously have lots going on to scale the platform. That's great. Maybe you might give us a bit of color and flavor to some of the acquisitions that you've done in the past and how they've bedded in and given you opportunities to move forward? And then how you see that space at the moment? And what's out there, and where are you looking? And where are the next steps?

Yes. I suppose the 2 -- we created by acquisition over the last 5 years, 2 really interesting growth platforms. Obviously, we've made 3 acquisitions in the nutritional contract manufacturing space in the U.S. and that's really put us on the map and given us a strong position. The U.S. nutritional supplements market is a retailer. It's about $56 billion. We estimate the contract manufacturing -- addressable contract manufacturing sector for us is about $8 billion. So even though we've made good progress, we're really still stretching the service. And we've still got -- in terms of mirroring the capability that we have in Europe, we still got plenty to go for there. And it's a very fragmented market. So we feel very optimistic about what we can do there. We also, obviously, within Health & Beauty have a beauty products business. We have a lot of expertise in that business. When we look at the U.S. beauty products sector, the contract manufacturing sector, it's a growing sector. It's a fragmented sector, a lot of the same dynamics that we've seen over the last 5 years in nutrition. So that's another opportunity that we're going to -- we'll be tackling over the next little while. And then obviously on the Vital side, we made a very important acquisition earlier this year of Wörner, which is one of the leaders in the supply of products into the primary care sector in Germany. And that's a sector we know well because we're the market leader in supplying products into primary care in the British market through our Williams Medical business that we've owned for the last 7 years. And that's a business we've invested in to, to really develop our technology capability. So we operate an omnichannel sales and marketing approach. We're selling across digital platforms. We're selling across contact centers, e-commerce platforms. And the market in Britain has obviously been adopting those digital ways of interacting over recent years. When we look at the German market, it's less developed actually from a digital point of view. So I think there's a big opportunity for us to enhance what we bought, taking the learnings from Britain and then really push on. It's very fragmented in Germany, lots and lots of privately owned businesses, some of whom face succession challenges with the aging population. So we think there's a lot of bolt-on acquisition activity in Germany that we can leverage. And I think as we've seen in the U.S., putting the flag down, getting senior executives on the ground in these businesses leads to other opportunities. So we've got broader ambitions beyond just the primary care sector, and we think Wörner and developing that business can be a good stepping stone to a much broader development for DCC Vital in the German and Continental European market generally.

Great. Well, you've given us a very upbeat picture of organic and platform -- sorry, organic growth and scaling the platform. Talk to me a little bit about being part of the DCC Group and being able to access the cash in the business. How is the process when you're looking to get some money to be able to put investors into the health care business?

Yes. Look, I feel very confident that we've got the absolute full support of the group and the Board to go and deploy significant capital in the health care market. It's a very attractive market. It's growing at higher rates than other sectors. We've got a very strong track record of growth over the last 10 years. DCC Healthcare has grown its profits by 16% compound and half of that has been organic. So I say, we've invested in our management infrastructure. One of the things actually we've done over recent months is we've put in place a team -- divisional team in the U.S. to support the businesses that we own today in the U.S. in a better way and obviously also to be in the market more consistently driving the acquisition activity. So I think we've got the management infrastructure and capacity. We've got the balance sheet obviously in DCC. We've got the Board support. We've got a nice opportunity set in fragmented markets. So I think we're very well set up to accelerate the deployment of capital in DCC Healthcare.

Excellent. Well, I see a question has just come in. So you're not going to have to listen to me for too long. So too many questions. So a question coming in from Rowan Smith from Setanta. Demand robust, outlook good, risk of new competitors entering the business or existing competitors increasing capacity? Is this a concern?

I think all of those things are correct, Rowen. There -- and have -- the demand growth has been very good consistently in our markets. There are -- and we do see competitors increasing capacity. But if you take the contract manufacturing business, it's difficult to come in and enter the business in a really credible way and particularly to be credible with the serious players. So you can't replicate decades of investment like we have or the depth of technical resources, the product development resources. It's difficult to replicate that very, very, very quickly. So certainly, competitors are investing to increase capacity. But the market is growing and that isn't a particular concern for us.

Good. Glad to hear. I have 1 or 2 more questions. I'm very conscious, we're going to open it up to the floor. It will be remiss from where I sit in a financial media space, not to bring up that supply chain. Can you talk to us about where you sit with that -- where the supply chain issues -- are you seeing any -- is it a growing concern, something that you worry about? Obviously, I don't doubt that you're constantly keeping a check on this, and this is your day job. And so -- but is there additional pressures that you're seeing out there at the moment?

Yes. Look, I think all through the COVID period, supply chain has been more challenging than heretofore. And I suppose part of the reason why we were able to deliver the performance we did last year and continue to expect very good growth this year is because we have those long-term supplier relationships, very robust supplier relationships. So that's been very helpful to us. There are -- we're not immune to the challenges that people are facing generally at the minute. But it's not holding our business back. There are pockets of challenges here and there, but it's certainly not having a material impact on our business. We're managing our way through it in a good way.

Excellent. Excellent. We talked a little bit about the regulatory environment. Another area of particular interest close to my own heart, sustainability. What can you tell us? What have you been doing?

Yes. No, look, sustainability is -- obviously in DCC, it's very close to our heart as well. As a group, we've set out our objective of being net zero by 2050 by reducing footprint by 20% by 2025. And I'm pleased to say in DCC Healthcare, we absolutely embrace that wholeheartedly, and we've made a lot of progress even before we came out with those kind of published targets. We were well on track against those measures. So we're -- I think approximately 65% of our electricity today is coming from renewable sources. And again, we're on a path to 100% over the next little while. Maybe just to give 1 example of EuroCaps, our soft-gel facility in Wales. We have 2 wind turbines at that site. We've almost 2,000 solar panels or we will when we finished the latest round of installations. And we're producing self-generating a significant proportion of the electricity that we require for that business, that manufacturing business. So there's a lot of initiatives going on around the group.

Keep up the hard work. I'm going to open the floor to analysts at Morgan Stanley, who's going to join us on camera.

I have a couple if that's okay, but I'll do them one by one. Firstly, you talked a little bit about supply chain issues and shortages that you seem to be managing that quite well. I'm just wondering on input cost inflation, particularly for things like ingredients or certain products that you distribute to what extent that you're seeing that in your geographies? And also perhaps you could comment on your ability to pass that on to customers? How those discussions are going and whether you're seeing any issues with that?

Excellent. So just to recap there, input cost inflation and if you're able to pass it on to your customers?

Yes. Look, that is a feature both in terms of labor costs and raw material costs. And yes, we have to and have been passing that on as we're passing it on in a good environment in terms of the demand for the products. So we haven't had material pushback in terms of implementing those price increases.

I think it's safe to say that costs are increasing across the world, but -- next question, we have Allan Smylie from Davy.

I have just a growth question to kick off from my side. So Conor, you said that growth in the U.S. market really accelerated last year, I think you mentioned 14%. So how should we think about the ability of the business to grow organically off this higher base both this year over the medium term?

Yes. So the market in the U.S., as I say, was growing at 7% or 8% consistently over the last 10 years or so. Had this spike last year, if you like, to 14%. And the projections are for continued growth, albeit more in the kind of mid-single-digit level over the coming years. So certainly, the market projections are for continued growth. Our own expectations is to continue to outperform the market. And we have particular strengths in some of the higher growth segments. So we're very strong in effervescents, both in the U.K. and in the U.S. We're actually the leading contract manufacturing -- manufacturer effervescent products. We've got strength in premium skin care products, which again has been -- is a growth area, and we're developing nicely in probiotics. We've got strength in nutritional liquids, which has been in a growth area. So complex formulations. And we mentioned organic already organic and natural materials. We've got -- those kinds of materials aren't the easiest to work with. We've got a lot of expertise in those areas. So I suppose we've always tried to position the business where we have the best margin opportunity, the best long-term sustainable profit growth opportunity more than kind of chasing top line. So we still feel very, very positive about the growth prospects for the business of this higher base.

Great. Excellent. We've got a few more questions here. Kate Somerville. We're going to jump on the screen now.

So I have a question on the Vital business. I just wanted to understand about last year how COVID really impacted it? I imagine there were some COVID-related orders. Just want to understand what offset that? And how we should think about the recovery into 2021 in those other parts of the business and how we should think about growth within that business going forward?

Excellent.

Sure. Yes. So I suppose it was an unusual year in Vital. Our product mix changed a lot in that business. And it just shows the agility of the business commercially and again, the robustness of the supply chain. So clearly, normal activity in hospitals and GP surgeries and the health care systems generally was down. So procedures -- normal procedures weren't happening. People weren't going to their GP in person. On the other hand, then obviously, the demand for things like PPE, products that are used in intensive care, which intensive care units were under huge rest, all of those demand was up. And so we had to react to that and adjust and obviously, we did that very successfully. And I think we are goodwill with our customers, with the health care systems, has increased on the back of that because we didn't let people down. So I suppose as we move into this year and beyond, the systems obviously are trying to ramp back up to normal activity. I wouldn't say they're at those levels yet, and we've been supporting them in every way we can to do that. And it's critical obviously for society that they do. There's a huge backlog now. I mean there's been -- people have probably read some of the statistics about the waiting list and the backlog of treatment in Britain, in particular, people have been talking about it. So we're working hard with the system to obviously to give them all the support they can as they ramp back up. So we're likely -- what we're seeing obviously is somewhat reduced demand for some of those COVID-type products, although that's not -- we don't believe that's going to go the way it's going to be at an elevated level because we're going to be living with something forever and then obviously ramping back up on normal activity. So yes, it's been an unusual period. But again, this was just the agility and the robustness of our businesses has really come through.

Excellent. And we have another question from Exane, George.

I guess just sort of following up on both Allan and Kate's questions there. I just wanted to understand how you see the margin trajectory of your business. And perhaps if you could maybe segregate the Health & Beauty and the Vital business. I'm guessing you saw a decent lift in both segments last year. Is that a sort of a path that could continue into the future?

Yes. I suppose maybe just a comment kind of a little bit generally on that. One of the things we have work -- we constantly work out, in fact, is really to -- is to optimize our sales mix. And I say we're not -- we don't chase top line anywhere. We're focused on -- trying to focus on sustainable business that gives us the best kind of margin and return on capital characteristics. So whether that's in the beauty area where we've really invested and focus in on premium skin care and -- or in the nutritional products area where I've talked about the kind of specialist -- more specialist areas that we focus on. Again, in Vital, people will know we've -- we exited the generic pharma business, which was a lower-margin business. We've also kind of downsized some of our logistics activity. So it's a constant feature of how we've been managing the business over recent years. And you'll have seen our margins nudging up over those years, and that's something we stay focused on. I don't think we can promise that, that trajectory continues forever, but it's certainly something we put a lot of effort into.

Excellent. We have another question come in from the audience. Marie Gillespie from Davy. So much U.K. production, any Brexit impact, the Brexit question.

There have to be a Brexit question. Yes, I think the biggest impact of Brexit for us has been additional admin associated with exporting product to Europe from our British manufacturing bases. So I don't -- we haven't lost any business. No customers have kind of said, well, you're in Britain, where our market is in Europe, so we're going to find a new manufacturer. And in fact, we've just won quite a significant piece of business in one of our facilities where an international brand was producing the product for Britain in a continental European site once produced in Britain. So perversely, actually, that's probably the only kind of piece of business moving in or out that I can attribute to Brexit. Otherwise, it's really been a little bit of additional admin burden. And most of that has been learning curve actually, teething issues, lack of clarity maybe from the government, from the system on procedures. So a lot of that is actually...

I think you're on your own on that, yes.

A lot of that's kind of flushed through and people got used to the new protocols. So it's -- we've managed our way through it, and it's been okay.

Excellent. It's not going away. We've got another question in from [ Maxine ] in TD Securities. Looking to add capabilities in the U.S. Caps and acquisitions. I think we covered a little bit about the U.S., but if there's anything else you want to add there.

Yes, this was the big -- if you line up our capabilities in -- for the European market in Health & Beauty against what we have today in the U.S. I suppose probably the biggest gap is soft-gels, which -- that was actually our first contract manufacturing acquisition in the U.K. way back when. So that's certainly something we'd like to have in the U.S., and we're active on that front in terms of developing relationships with potential acquisitions. The beauty area is the other 1 that I touched on. Again, we focused on nutrition to really get going on that and make sure we're laser-focused on building our position. But with the additional resources we have in the states and having established a good position in nutrition, albeit with lots to go for still, I think we can afford that to start looking at the beauty market. And as I say, it's fragmented, it's dynamic. It's higher growth.

It's huge.

It's huge. So lots of opportunities for us there.

Excellent. Very conscious of time. But if people have any more questions, please do feel free to send them in. We've got another question in here from Rajesh in HSBC. Average duration of products that you manufacture. I have put you under pressure.

You're going to have to interpret that. But I presume you're thinking maybe about the consumer products, how quickly the brands cycle them that is -- that's one of -- we probably -- it varies from format to format but -- I'm guessing, but probably 20% maybe a little bit more of everything we produce each year in our facilities as new. So that's...

Natural turnover.

And to be able to cope with that to turn -- to develop those products, go through formulation, go through testing and quality. And that speaks to the kind of resources and capabilities that we that we have. So that's -- there are certain products in markets that products have a much longer lifetime. But typically, it's a very dynamic market. It's a market that likes innovation. We see a lot of the development of the e-commerce channel, about the digital brands or virtual companies who are coming to contract manufacturers looking for everything. So the -- probably that pace of innovation and dynamism is only going one direction, and we're very well equipped to manage that.

Fantastic. Well, I don't believe we have any more questions, and I'm very conscious of time. I found that hugely informative. Is there any passing comments or anything you'd like to leave the audience with? I mean I personally took away that there is great confidence and ability, capability within the division, you have lots to play for and lots of ambitions. And hopefully, you'll be around for the next 14 or 15 years. But is there anything you'd like to leave the audience with as a general closing?

Yes. Look, I think where DCC Healthcare is probably in the best shape it's ever been in. As I said, it feels like we're only getting going. There's huge among the team. I know this huge excitement and enthusiasm for the opportunities we have, lots of organic opportunities and lots of organic investment opportunities and obviously, we have the balance sheet to support that. And then a very interesting opportunity set from an acquisition point of view, operating in fragmented markets. We've got additional management capacity now to be able to absorb those acquisitions. We've got a very nice growth platforms set up in the U.S. and in Germany that we can build on. And so we think we can be a much bigger part of the DCC Healthcare Group over the coming years. That's certainly for the -- I speak for all the health care team that's our target and our expectation.

Fantastic. Well, thank you very much. It's been absolute pleasure from my perspective. I hope you all found that informative. I know that the IR team, Rossa and [ Hollie ] are available to take any further questions if anybody has them. And please feel free to direct them into the group. And we look forward to seeing you in November at results. Thanks all very much.

Thank you.

Thank you.