Fletcher Building Limited (FBU) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Fletcher Building FY '23 Half Year Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. Ross Taylor, Chief Executive Officer. Please go ahead.

Good morning, everyone, and welcome to the presentation of our half year results for the 6 months ended December 31, 2022. Presenting with me today is our Group CFO, Bevan McKenzie. And the topics we plan to cover are shown in the agenda on slide 3. I'll provide an overview of the half year results, and then Bevan will provide a bit more detail on the financial performance and the outlook for the second half. I'll then sum up with how we're planning and thinking about FY '23 and beyond. And finally, we'll run through your questions at the end. Turning to slide 4 and a summary of the half year results; we had a solid first half. EBIT increased year-on-year to $360 million, and this was underpinned by good growth in margins in our materials and distribution businesses, offsetting softer residential house sale volumes. Net earnings, however, were $92 million, and this follows the impacts of the Convention Center provisions we communicated in December. Return on funds employed was at 17.8% was ahead of target and our balance sheet remains strong. Against this backdrop, the Board has declared a fully imputed interim dividend of $0.18 per share. We continue to make good progress on around $700 million of committed growth investments, and we'll now start to see earnings from these drop to the bottom line. This will add around $25 million of run rate EBIT in FY '24 and grow from there until fully mature in about 3 years' time. Despite the strong performance of our business through the first half, we have modified our full year EBIT guidance to a range of $800 million to $855 million. And while we continue to target the top end of this range, the trading impacts from the extreme wet weather events in New Zealand through January and February have necessitated a more conservative guidance position. And finally, we remain very focused on being prepared for a softer FY '24, and I'll cover this in a bit more detail at the end of the presentation. Overall, group revenue, profit and profit margins grew over the comparative 6 months, as shown on slide 5. The performance of our Materials and Distribution businesses on both sides of the Tasman was one of the key features of the half year. Combined, these businesses produced an $83 million profit improvement on the prior half and saw margins expand from 7.4% to 8.9%. Meanwhile, after 2 years of very strong growth, New Zealand house sales were softer as expected and industrial development earnings returned to a more typical run rate. In total, this resulted in EBIT being $63 million lower than the prior half for our residential and development businesses. And the Construction division returned to first half profitability, albeit it was impacted by the additional provision on the Convention Center project. And as mentioned, Group return on funds eased slightly to 17.8% as we invested through the half, but it continues to remain in line with our intent to keep it above 15%. Moving to slide 6 and on to cash and leverage; cash flows from the Material and Distribution divisions were strong at just over $200 million, but this was offset by outflows to rebuild our land and housing stock following the significant drawdowns that occurred through FY '21 and '22. The net result of this and the growth CapEx investments we made through the half is that net debt increased as flagged to $1.4 billion and leverage ratio has moved to 1.25x. All this maintains our strong balance sheet position with available liquidity at the end of the half year sitting at $1.1 billion. On slide 7 and after adjusting for the construction provisions, we show that net earnings for the half were $92 million. Earnings per share before significant items, which is the basis upon which we pay our dividend, remains solid at $0.259 per share. Against this backdrop, the Board declared a fully imputed interim dividend of $0.18 per share to be paid in April. Our ongoing good progress on making our workplace safer and in reducing our carbon emissions is shown on slide 8. Protect, our multiyear safety program continues to drive improvements. At the half year, we recorded injury frequency rates of 3.16%. This is a 24% reduction from the comparative period. And pleasingly, 94% of our sites remained injury-free through the half. We continue to make very good progress on reducing our carbon emissions, getting more of our products sustainable and substituting the fuels we use with sustainable options. These efforts are being independently recognized. And during the half, we received an improved rating in our most recent climate change assessment by the CDP, and were again included in the Australian Dow Jones Sustainability Index. Fletcher Building was also selected as a member of the 2023 Sustainability Yearbook for the first time, acknowledging our sustainability performance in the top 15% of companies worldwide in our industry. Slide 9 highlights our performance through the half across all of our divisions. The uplift in profits and margins across all of our Materials and Distribution businesses was a highlight. This was delivered through an ongoing focus on good operational basics as well as the benefits from the various growth initiatives staying to flow through to the bottom line. The performance in Australia is worth a particular mention with the division now achieving sustainable EBIT margins above 5%. While down half-on-half, our Residential Development division performed well in the face of a softer New Zealand housing market. The combination of the quality of the communities and product we develop with a skew towards a lower average unit price has meant we continue to sell reasonable volumes at good margins. And as I've mentioned in the past, while the market remains softer, we'll adjust our capital envelope and sale volume expectations to suit the market and only return to a growth focus when the market conditions allow. And in construction, it was nice to return to an underlying profit in the first half. This was despite the unusually wet weather and ongoing constrained labor market. The order book remains strong and only 2 legacy projects now remain to be completed. There are more details in the division in the appendix to this presentation as well as in our interim report published today. I'll now hand over to Bevan, who will take you through the details of our financial results for the half year.

Thanks, Ross, and good morning, everyone. Turning to Slide 11 and the income statement; a couple of things I'd point to here. Input cost inflation has remained a feature throughout the half year and has averaged around 10% per annum compared to half year '22. The ongoing focus on cost recovery through pricing though has been effective, and this can be seen in gross margins in the Materials and Distribution divisions lifting by 180 basis points. Funding costs of $39 million have risen on higher borrowings and variable interest rates as flagged, and we remain in line with our prior guidance for full year FY '23 funding costs of $85 million to $90 million. The significant items charges here of $154 million relate almost entirely to the additional provision on the NZICC project, which I'll touch on more shortly. And finally, here, tax expense was lower due to the significant items charges, but excluding these, the effective tax rate was in line with expectations at 26.5%. Turning to cash flows on Slide 12. As Ross has mentioned, pleasingly, the Materials and Distribution divisions delivered robust cash flows of $206 million. The key feature of the cash flow result in the half was the expected rebuild of land and housing stocks after a material drawdown of these in FY '21 and '22. Given the softer housing market, we have paused work on some housing developments, and we've entered into very few new land commitments through calendar 2022. We expect that this focus on working capital management will mean a material cash inflow in the Residential and Development division in the second half. Cash tax payments in the half were $154 million, and we continue to expect that for the full year, these cash tax payments will be around $190 million. Slide 13 provides more detail on the working capital movements. In residential and development, approximately $200 million of the movement was from prior land commitments brought on balance sheet and about $100 million was from the rebuild of housing inventories. As at December, we had around 75 completed houses in stock, which is about the right level for the business and which is up from virtually nil competed houses that we saw through the past 2 years. In our Materials and Distribution divisions, debtor days were up only slightly, and bad debt levels have remained low, though our credit teams remain very focused on this as we anticipate a softening market into FY '24. On inventory, we have the usual seasonal uplift in the half year, which we expect to unwind in the second half of FY '23. And we then expect further inventory reductions in FY '24 and therefore, working capital inflows in these divisions. Finally, here, the creditor movement in the half was from the higher balances at June returning to more normal levels in December with underlying supplier credit terms remaining unchanged. Turning to the NZICC project on Slide 14. As we announced in December, construction progress on site continues to be good. Key program milestones are being met and we remain on track for our target completion in late calendar 2024. Our insurance policies continue to respond in line with expectations. However, the complexity of the rebuild and particularly the repair of water damage to steel coatings means that total remediation costs for the project are now expected to exceed our insurance limits. In short, a greater number of project resources to complete the works, combined with the underlying inflation of labor, trade and material costs has led to the provision. In terms of the cash flow impact, we expect this to be around 20% in the second half of FY '23, around 50% in FY '24 and the balance in FY '25. The provision is tax deductible and the impact on cash tax payments follows broadly the same cash profile as just described. On Slide 15, our base CapEx of $200 million to $250 million per year remains well controlled. And as Ross has highlighted, we're also making strong progress on our program of base -- above base growth investments. For the full year FY '23 and inclusive of both the TUMU & Waipapa acquisitions, we expect this growth CapEx to be around $400 million with the additional $300 million to flow across the FY '24 to '26 years. This total growth CapEx is up from our previous guidance of around $500 million, and that's mainly due to the addition of the Waipapa timber acquisition plus a small increment on the other progress -- projects as we've refined our plans in those areas. We do continue to expect ROFEs at or above 15% on all these growth investments. Finally, the Winstone Wallboard plant remains on time and on budget and on track to open in late FY '23 as planned. We will keep our current Auckland plant open for a few months, and then this well-located site will be repurposed through 2024 for our distribution operations. On slide 16, closing net debt for the half was $1.4 billion, with the increase in the period due to the expected investments in land and housing stocks, CapEx and the tax and dividend payments. On slide 17, as previously guided, this has resulted in the leverage ratio for the group of 1.25x at the end of the half. For the full year, we continue to expect the leverage ratio to remain at the lower end of our target range. This is from strong second half trading cash flows and the growth CapEx investments being the 2 key drivers. Slide 18 shows that the group's funding profile remains strong with around $2.5 billion of total credit facilities. During the half year, we extended our syndicate bank facility by around $700 million, which means the group's total liquidity remains healthy at $1.1 billion. Our average interest rate is 5.2% and currently 53% of all borrowings are at fixed interest rates. On slide 19, our returns to shareholders remain strong. The Board has declared a fully imputed interim dividend of $0.18 per share, which equates to a 69% payout ratio and reflects the ongoing confidence into the underlying performance of the business. On slide 20, we provide more detail on our approach to managing the Residential and Development business. As Ross has highlighted, in a much softer New Zealand housing market, the business continues to deliver decent margins, sales volumes and returns. Despite prices being down around 10% to 15% versus the peak, our housing margins are still at around the 20% level. In terms of volume, the left-hand chart here shows that so far in FY '23, we have sold or contracted a total of around 400 units. This comprises the 189 units that we took to profit in the first half, plus an additional 200 contracts we have in hand today. This reflects the quality of the division's product offering and also that we are pointed into the deepest part of the housing market. In particular, the business has good stocks and price points below $1 million in Auckland, which has been the most resilient market segment and has represented around 2-thirds of our sales year-to-date. For the full year, we're targeting around 800 unit sales. And while the market remains softer, we will adjust our capital envelope and our sales volume expectations accordingly. We, therefore, expect funds invested in the division to reduce to around $800 million at the full year, which will produce a material cash inflow in the second half and will mean that our ROFEs for this division remain well north of 15%. Finally, on land, we are entering into very few new commitments. We're in a good position to do so as we have a land pipeline in place that we can draw down on. These prior land commitments have been contracted at good rates, and this is demonstrated by the refreshed independent valuation of our land on balance sheet. Consistent with the position we talked to at our Investor Day in June this land continues to be valued at around $350 million higher than our book value and will support our margin levels even in a softer market. In summary, the Group's results in this period demonstrate good ongoing levels of performance, particularly at the margin line as well as an ability to adapt to the market reality, especially in the housing business. For the full year, our group earnings guidance is a range of $800 million to $855 million. As we announced on Monday, the previous upside above $855 million is now unlikely due to the trading impact of the adverse weather events in the North Island of New Zealand through January and February. We continue to target the top end of this range, and we've laid out here on the slide the key assumptions behind that target. We remain confident in our margin trajectory. So the 2 key drivers of the result will be market conditions. Firstly, in the Materials and Distribution divisions, we've assumed trading volumes for the balance of the year in line with the first half, which would result in a roughly 48%, 52% first half, second half EBIT split, which is broadly in line with the typical weighting for these divisions. And the second key drivers we've highlighted is house sales levels with the top end of the guidance range, assuming we get to roughly 800 sales. Finally, we expect strong second half cash flows due to the timing of earnings and the unwind of inventories in both the residential and development and the Materials and Distribution divisions. I'll now hand back to Ross to cover off the longer-term outlook.

Thanks, Bevan. Our overarching theme in today's presentation is that we have Fletcher Building well positioned to perform through what will be a more uncertain market. And I cover the key points on this on slide 23. Firstly, we expect EBIT for the full year to be in the range of $800 million to $855 million. Secondly, it's likely that the softer housing market will finally flow through to lower volumes in our Materials and Distribution businesses in FY '24. As such, we are moving now to ensure we set our cost base for this with our aim being to hold margins close to the present FY '23 levels despite this softening. And finally, we continue to look through the cycle and our growth investments will remain a key area of focus. Importantly, EBIT run rate benefits are now staying to drop to the bottom line and will continue to grow in the years ahead. I think Slide 24 then sums up this overall position nicely across 5 key areas. As mentioned, we expect to see solid profit growth in FY '23. We are well-positioned for a softer FY '24 with well-established cost control and operational disciplines across the group. We have an established pipeline of growth opportunities that are [ stained ] to mature in bottom line profit increases and will grow progressively over the coming years and be in higher margin areas. Off the back of this, we are confident we'll soon have the business positioned to deliver sustainable through-the-cycle margins of 9% to 10%. And our financial position is strong, and we intend to keep it that way. With that, I'll now hand back to the operator to run through your questions.

[Operator Instructions] Your first question comes from Daniel Kang from CLSA.

Ross, I just wanted to ask your thoughts on channel inventories. I guess some industry peers recently indicated that the ANZ Australia, New Zealand markets saw some significant channel destocking over the first half. Just your thoughts on that and whether that you feel has played out?

Yes. Look, we same thing. But broadly, I think there's a few areas, but it's broadly played out through the last half and the first half of the year, but there's still a few areas. But most of our inventory was a bit toppy is really due to more normal seasonal fluctuations, which we think will sort themselves out as we get into the second half, which is what we flagged. So I think we're just about through the destocking in most areas.

Got it. And in terms of inflationary pressures, are you seeing much signs of any easing -- any particular areas you'd like to highlight?

Look, it's -- I think it will ease. But I can't really point to -- so it was just -- we saw about I think, across the board through the last 12 months sort of about 10% in the building product space. And I think it will start to ease and some of the commodity cycles are moving around a bit, but I can't really point to a lot of it yet. It's more of an expectation and we'll have to sort of let the next 6 to 12 months run to see that visibly occur. But my expectation would be to start to ease.

Your next question comes from Lisa Huynh from JPMorgan.

Just about FY '24 volume guidance of down 10% to 15% next year. Can you just walk us through what you're assuming for so consents and how confident you are around that number, given FY '24 hasn't even started yet?

Yes. Okay. I mean I might come back to the confidence, but I'll come back to that at the end. But in the breadth, the broad, and this applies pretty well in both New Zealand and Australia. Infrastructure looks pretty solid and so does the non-res commercial space, solid maybe off a little bit. So there, give or take a wash sort of as the way I'd characterize them. Then you get into residential. And what we're really saying with where we think it will go. It's been running at around in New Zealand around the volume of work put in place around -- we've always talked about the 37-ish sort of 1,000 houses per annum. We expect that to come back to more what I call mid-cycle levels of 30,000, 31,000. The consents are a little bit confusing. I mean we did see them drop off a little bit in the December on December, but they're just not all going to get built. And it's a bit hard to work out the New Zealand consents because we've got the code changes coming up. And how much of that's being rushed through to get ahead of some of those code changes is again a question. So -- but the things we're looking at to give us a sense of confidence, whatever you want to call it, of those residential consensus. We just look at our own residential business. We thought we'd do 1,100 this year. We're doing about 800. That's about 20%, 30% down. We're seeing it in our customer base. We're seeing it in our frame and truss orders. So that's sort of what we're seeing and what I call our lead indicators. So I think it will be there or thereabouts. And that is what when you blend it all that up, it gets to the 10,000 to 20,000 -- sorry, let me say that again, that gets us to the 10% to 15% down overall because it is a blend. And it's a similar dynamic in Australia. So if you sort of say Australia has been above the 2,000s, it will probably get back to the 180 in terms of consents, and that is how we're thinking of the volumes as well. So overall, we can sort of see that when you talk to confidence, it's our best guess -- and what we're trying to do is to be pretty authentic in our own thinking with it, so we make sure we're positioned for it and not sort of kid ourselves, it's going to be more of the same. So that's how I'd characterize it.

No, I appreciate the answer. And I understand it's still the best guess at the moment. And I guess, in terms of the flexibility of the cost base and the downturn, when we spoke -- last spoke at the Investor Day, you had that chart of EBIT margins across the businesses where the majority of the businesses, their EBIT margins were above the industry median. Can you just make a comment around fixed and variable costs, how that kind of compares and how that kind of plays out in a downturn as well?

Sure, Lisa. This has been one of the really strong areas of the business performance, getting that fixed cost base in really good shape. There's probably a little bit more there Lisa that we can do, but what you're going to see principally is the flexing of the variable cost base. And if you look at the 4 big divisions, they're sort of 76% variable, 24%, 25%-ish fixed. So you got quite a big variable base there. And within that base, particularly in your operating labor base, you've got about 10% of your total labor, which is either contract temp or over time. So what the teams are doing is they're making sure on a couple of our businesses, we're already doing this, we are moving to flex their operating labor base, your shift patents, etcetera, to adapt to the volumes that you need for the market and environment. So that's where the team is really well set out. As I say, a little bit in the fixed space and the discretionary, but it's mainly about adapting on the variable line. And that's just the fruits of the work that the team has done over the past few years.

Your next question comes from Simon Thackray from Jefferies.

I've got a couple of questions. Just -- can we just dig into the resi. I just want to -- a couple of points of clarification. 189 unit sales, which was down 32% year-on-year. And you said in the release, 300 were contracted in the first half of '23. And then you noted in your report 388 sales agreements at the end of January. And Bevan, I think you just said 400, I don't know if you were rounding or you were implying that you'd sold an extra 12 in February. So I'll just start there.

I haven't been out this morning and sold 12, Simon, that was rounding. We've done 388 at the end of January.

Okay. Cool.

And I think where you go there, gross margins in Steve's word, he's doing gross margins of 200 to 250. [indiscernible] obviously, in the EBIT per house that your numbers will give you in the first half, it's a little bit lower. That's just -- you've got slightly lower leverage in that first half on the units taken to profit. But to get to that full year number, if you're doing $200 million to $250 million of gross margin with the balance. And we need to sell Simon about 20, 22 a week from here, and we've been doing slightly less than that year-to-date. So you've got to get a little bit of an uptick, but it's certainly achievable.

Okay. That's helpful. And then just if we talk about the underlying interest in resi, I know we've got a -- because we've got a net contracted year-to-date number of 388. But how does the cancellation rate look now, say, versus the long run average or even versus 3 months ago?

It's been very steady. So you get the odd dropout, but they're quite rare. You might get one a week on average that drops out. Obviously, there's been a few more being signed up on a conditional basis, particularly on finance. But again, it goes to the quality of the product and the part of the market that Steve has pointed in. So the odd one, Simon, certainly hasn't picked up generally when people get committed with a conditional agreement on Steve's homes they complete.

Okay. And then if I just take the top line, the revenue, whether Ross or Bevan, you can talk to this, the contribution of volume versus price in the first half '23. And then with the observed inflation, what further sort of key price rises are in the market for this year? And then the final wrap on that pricing question is with the severe weather disruptions in Auckland, does that have any impact on your expected price realization? Do you need to re-point capacity for repair and rebuild away from the existing pipeline or do you think it will have any impact whatsoever?

So again, in Steve's division, prices, we're very much following the market, Simon. So our prices are down just north of 10%, sort of 12%, 13% versus the peak, which was late.

Sorry, Bevan, I was talking more across the broader materials portfolio and distribution portfolio.

Apologies, Simon, both of us enthusiastic on resi. So what you've seen on price is we've more than recovered that inflation. So the average price increases across the Materials and Distribution businesses have been in that 10%, just above 10% per annum. What we're very focused on is flexing that to the input cost line coming through. As Ross said before, we will -- we expect to have a bit more inflation. So you can expect to see more price I think, coming into those businesses. I don't think you'll be at double-digit levels. I think you're probably going to be more in your mid-single digits, Simon. And you're obviously as the market comes off, making sure you adapt that to the demand profile that is there. In terms of the impact of the weather events, I don't think it's going to have much of an impact on price. It's obviously -- and look, the teams have done an outstanding job both in late Jan and in recent days, the impact has been significant across the North Island of New Zealand. The teams have scrambled really well. That will create some work. But our expectation is that, that's probably going to take some time to come through. And it won't be overly significant in the grand scheme. It will probably smooth volumes heading into FY '24, but again, a bit of time before it flows.

Okay. That's great. And then the final question is just on Australia, which was a strong sequential improvement in the EBIT margin. Back in the Investor Day, we talked to 200 basis points to 300 basis points of improvement over the medium term. So just digging into the confidence on that target against the market backdrop. And then between the good work that [indiscernible] insulation, where will the heavy lifting come from across sort of plumbing [indiscernible] Stramit and Laminex going forward to get to that margin target?

I'll answer that to prove I'm still here, and I will make the comment. It was good to get -- see Bevan get caught with rounding -- that's usually my space. So it was very satisfying, but I'll move on to answer the question and stop filler busting. Look, so the way I think of the margins in the overall Australian business now is I'm confident that we've got them above 5% sustainably. So as we look through the sort of market outlook that's what we're thinking. So we'll be 5% or above as we think about the coming FY '24 year. We're also still focused on them going to next leg. So the way I think about the Australian business has been a good job by the team. We've been focused on getting to this first milestone. We're there. We want to keep them there even if this market softens a little bit, but then we're really actively doing things that allows us to then take it that next leg and go after that 200 basis points to 300 basis points. And broadly, I think it's good to call out insulation. I think they've done a great job and there's probably a bit more there. But the heavy lifting of where it goes from here will be in the Tradelink and the Laminex further improvements and obviously, Stramit. And it hasn't really moved in terms of what we talked about the investment day. There's more we can get in Laminex as we think about profit segments and where we grow at Tradelink, we've got that goal as -- in the plumbing distribution to add 50 basis points to 100 basis points each year as we improve from here, and that's still the plan and it's still the trajectory we're looking at and Stramit again and again, with improvement opportunities just as we focus on those higher-margin categories around just the basic steel roofing products. So there's no real change. And the only thing that will happen through the 24-year it's a bit softer is the focus on just that variable cost element and making sure we hold on to those margin improvements we've made to date.

Your next question comes from Keith Chau from MST Marquee.

First question just on guidance. I think your $700 million of EBIT expected for the Materials and Distribution businesses implies a seasonality of about 48-52 for the full year at the EBIT level. I'm just going to understand, given the discussion around a declining profile of demand going into FY '24, but perhaps more significantly already the weakening seen for your residential home sales and also given the weather that we've seen at the start of this year, what are your assumptions in that business actually still being able to do a normal seasonal skew for FY '23 from an earnings perspective? If you can give us some color around that. First off of that, that would be good.

Look, the way I'd characterize it is the weather is a little bit of a headwind. But fundamentally, the dynamic of the capacity constraints still playing out in what I call the volume of work being put in place is still real. And not that I really -- and as Bevan mentioned, when you think of the -- there'll be a bit of elongation of that probably as we get into the April, May, June as some of the repair work sort of actually gets into the channel. So -- and you can't predict this precisely, but that's why we put the range out there. But our expectation is in the volumetric part of our business, that backlog and a bit of extra work will most likely hold the volumes up there or thereabouts. And that's what gives us the confidence, even despite the weather that give or take, we should still see the 48-52 split. So -- but the reason that we're sort of pointing to that can't keep going on because the volume of housing is going down, and we're seeing it in our own residential business, but we're also seeing it in where we provide product into civil works for subdivisions that -- and as I said, the frame on task. So you can actually see the future activity coming off back to what I call those mid-cycle levels of around 30,000, 31,000. So that's why it's hard to pick exactly which month that plays out. I mean I wish my crystal ball was that good, but hence, why we've ended up with a range. But I think we'll be okay for the balance of the second half before we start to see it.

Okay. Understood. And then just a follow-up on that, and this is a discussion point we had [indiscernible] the fourth quarter visibility, any improvement in that, given we're now in February. I know we talked about it back in December, but any update on fourth quarter visibility given the significance of that quarter for earnings, was it good?

Look, the work pipelines look solid. You talk to your customers out there, Keith and the work is there. And that's what underpins that top of the guidance range assumption of volumes in line with the first half, we get there. So the work is there. If it gets drawn down on and when you're looking at your splits, the other factor to consider is that the first half of the year, not just Jan-Feb, first half has been very wet. You think of the delay to the roading season in New Zealand that really didn't get going. So there's a lot of work to be done. The customers' orders books are there. So sitting here today, we've got reasonable confidence around that. We just need to see it get drawn down on and play out. And we need, candidly, heavens to stop opening, we'll be able to be able to get some more work done.

Okay. And perhaps just a follow-up, well, you've got the mic. Just on the cash generation from the resi business. It looks like from the slide the net change in cash is $100 million -- or sorry, the net tangent fund employed, it's about $100 million half-on-half for that residential division, and I'm rounding there also. But are there any revaluations assumed in that half-on-half movements, which means that, that $100 million change in capital employed is not a good proxy for cash movement?

No. There's a very small amount in our Vivid business, but it's not material, we'll both be in our rounding Keith. So if you look -- if you're taking earnings plus your net change in working capital, you'll get to a good proxy for the cash in the second half. And you definitely had a build in the first. You see unwind in the second. So it'd be a good cash from Steve in the second half.

And then the unwind of working capital in FY '24, any incline on that?