Flowtech Fluidpower plc (FLO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen and welcome to the Flowtech Fluidpower plc Half Year Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And as usual, if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to CEO, Bryce Brooks. Good morning, sir.

Yes. Good morning. Thank you very much, Jake, and good morning to everybody joining us this morning. Our presentation today is broadly in sort of 3 sections. For those who don't -- aren't familiar with Flowtech, I'll try and give a quick counter through some of the basics of our organization and what we're about. I'll then pass over to my colleague, Russell Cash, CFO, to talk through some of the financial information that we've disclosed this morning. And I'll then following that with some of the strategic developments and outlook that we see for our marketplace over the coming sort of 6 months plus. So without further ado, in terms of our fundamental offering, everything remains broadly the same. As some investors will know, we operate in a very fragmented marketplace, many players in our marketplace. Of recent note is Diploma plc have acquired an organization called R&G Fluid Power, who operate in certain aspects of our market but are more predominantly in industrial tube and fittings. That was a recent transaction. We operate in the 3 countries; the Netherlands, Ireland and, obviously, here in the U.K. Our capital structure is something that's proven to stand us in good stead over recent years. We've come through pandemics, supply chain issues. We've started -- re-commenced dividend payments this year, all without recourse to any external funding requirements and all within our own sort of facilities. And we'd like to think we've got a leadership team that has some experience and skill sets. Talking of the leadership team, obviously, myself as Chief Executive, I've been with the organization since 2010, previously as CFO, but Chief Exec since 2018. Russell joined me in 2018. Many of you will know Roger McDowell through many of the investments of which he's been -- is Chairman of. Nigel Richens, our Senior Non-Exec, has been with us since floated in 2014. And then during the course of this year, we've added the skill sets of Jamie Brooke and Alisa Webb as Non-Executive Directors, who brought considerable additional skill sets, both operational, commercial and financial. So we feel our Board is now very broadly based. And certainly, Russ and I are very pleased with the input that we get from our colleagues. Overall, we are the U.K. market leader with around 20% market share of the fluid power distribution markets. We're a trusted partner for both customers and suppliers, and we're a specialist distributor of components and services in hydraulic and pneumatic components with hoses, fittings and valves, filling certain aspects of the industrial side of things. Crucially though, and underpinning our digital strategy, is we have thousands of touch points to our sector, both as customers, suppliers, stocking and in terms of the locations. We'll talk about some of the productivity improvements that have come through. But overall, we still operate out of 16 locations in our home geographies. The key supplies that come through to us are all the major global brands. Parker, recently with the acquisition of Meggitt, is now a 30 billion turnover, but one of the cornerstones of the global marketplace in pneumatics and hydraulics. Bosch Rexroth, many people will know of. Danfoss, who recently acquired the hydraulics arm of Eaton, so now operated by EUR 7 billion. So there's some very significant players in this marketplace. Walvoil and Interpump brands from Italy. We have representations of all the key partners in this particular sector. The pneumatics and hydraulic industries are very widespread in their bias, pneumatics particularly so, across a number of industrial sectors, food processing, electronics, medical. Whereas hydraulics has a bias towards the construction sector, about 40% in that particular side of things and a broad split between what we call mobile hydraulics or an application on things such as a JCB, a piece of plant and industrial applications. So for example, in a bottling plant for moving forward. Overall, our organization is owned with the investment funds shown on the screen, about 64% covered in the top 10, very solid register, very growth-focused, all of whom are now long-term players in terms of their position with Flowtech over the last 3 to 4 years. So in terms of moving through to some of the financials, I'll hand over to Russell to provide the headline financial and trading review.

Yes. Thank you, Bryce, and good morning, everybody. So this is my slide up here in there, first slide. Yes. So in terms of the headlines, from the top down. First of all, on revenue, that increase of GBP 2.2 million is 4.8% on a like-for-like basis and across our segments, and Bryce will touch more on this in a subsequent slide. That's 1% up in Flowtech, 6% up in solutions and 12% up in services. We'll talk a little bit about the price/volume mix a little bit later. And equally, we'll talk about how those respective increases compared with what are industry structured. Without stealing Bryce's thunder, the performance of Flowtech at only 1% is actually not bad at all, but we'll come back to that. In terms of the gross margin, this is, I think, the 8 times, I presented either full year or half year results, as Bryce briefly alluded to, I arrived at the very back end of 2018. And one stuff that does stick in our head because it's part of our DNA is the quality of our GP percentage, which has, up until now, varied between 33.8% and 35.7%. So it is pleasing to see 36.3% being presented. But we're not patting ourselves on the back too much on that because, of course, you'd expect us to be knocking out of the park on the GP percentage when there's the inflationary pressures that the broadcasters seem to remind us about every evening of every week nowadays. But that is part of our DNA, and it is nice to see that trending in the correct direction. In terms of our underlying operating overheads, again, there's a slide a little bit later, but we are pleased that we contained the headline increase to 2%, when people are now talking about 22% inflation last night, I caught a glance of the news. And the reason that we've achieved that is because with what we've done and what we're about to do, our head count will be down by circa 8%. And if we look back over an 18-month, 2-year period, we decluttered and simplified our property estate. There's 8 properties that have left the P&L account. So it's for those reasons, essentially, that we contained the increase to a very modest GBP 0.2 million. Now, so when we add that all together, of course, we get a not insignificant, close to GBP 1 million improvement in our underlying operating profit. So again, trending back to sort of a number where we wanted to ultimately get to. That, I'll say a little bit more about on the next slide, but suffice to say, whilst it's gone up, it's very definitely under control. And it will very definitely come down in the second half of the current financial year. So I seem to be looking up to always pretty simple debt bridge graphs to be honest. So there's only 2 bars that are really worth talking about. But perhaps -- that's a 6-month debt bridge, but if I just reflect on a 12-month period, which in some ways is obviously more meaningful and, typically, when you think about the receivables element of the debt bridge, that's gone up by GBP 6 million. Our inventory has gone up by GBP 11 million. So obviously, in simple terms, we're doing something right, which is reflected by the biggest green bar there. So we're generating nice cash profits, but we chose to invest a chunk of that into our inventory book; GBP 11 million, GBP 35 million, I think, versus GBP 24 million 12 months previously. Again, pretty significant but very deliberate and it will begin to unwind in the second half of the year. And that is the single biggest reason why I'm confident that, that, obviously, combined with a continued green cash profit bar, will deliver debt reduction certainly in H2 of this year and probably into 2023 as well. So well within the banking facilities and fairly obviously covenant compliant. Just before I hand back to Bryce for the meat and the heart, I guess, of the presentation in what we do next piece really, just on the capital allocation policy. We did reintroduce our dividend, a materially more modest level, 2p in respect to 2021 performance. I think pre-pandemic, it was over 6p per share. We felt 2p was a more sensible balanced level. So we do respect the desire of some investors to receive dividend income, but that's not our focus. Our focus is on managing our debt position. And whilst we're right here, right now at perhaps the upper end of that 1 to 2x EBITDA metric, that's fine. And as I said, it will come down. Underlying EBITDA is about GBP 10.5 million to GBP 11 million. So the fact that we're at 19 is fine. So that's our focus. And in terms of inorganic growth, it's a term, we're certainly not hunting down acquisition opportunities, but equally wrong with us not to have a look at stuff if it hits our desk, but that's not what it's been all about in the last 4.5 years. It was 4 years of acquisition activity. It has been 4.5 years now with simplification, decluttering, clarifying positions. So all in all, I guess the head teacher has given a report. We think we've done pretty well, an encouraging performance, if you like, albeit still, unfortunately, some degree of disruption in the classroom.

Okay. In terms of the sort of segment analysis, in some respects, the performance of Flowtech against our original aspirations at the start of the year could be seen as slightly disappointing. But we have to put that in the context of the overall markets illustrated by the industry stats that have come through from our industry body, the BFPDA. Flowtech is a sort of 30% hydraulics, 70% pneumatics and industrial organization focused on MRO. So it's clear that it's comparative in 2021 when we had pretty strong rebound from the COVID conditions of 2020. It was maybe slightly ahead of maybe what the underlying market is at, and that's been reflected in some of the settling back in those pneumatic segments, particularly inside of Q2. In parallel to that, hydraulics has equally performed very well during the course of this year. And that's where our solutions organization sits almost exclusively 100% of its activity, and you can see the numbers yourselves. Now these are not volume. These are purely sales value underneath that in order to reflect the inflationary trends at product set level, which we estimate is between sort of 5% and 6% full year impact. You can work out the balance, therefore, in terms of sort of overall volume metrics. So pneumatics is down at sales and more heavily down at volume. Hydraulics is up in terms of overall volumes. But the majority is through price impacts. But across our organization, we think we've handled both of those things fairly well. Margins in all our areas are up significantly. And the highlighted performance is clearly in solutions, where it's achieved 13.9% contribution in the first half, well beyond the sort of target of 10% we saw ourselves as a sort of long-term minimum expectation. Flowtech's dipped below the sort of 15% benchmark. But as we'll talk about in the second half, it's announced the closure of its Leicester warehousing operation. The commercial function there will relocate into a local office environment. Once that's enacted through our accounting position, then we're pretty confident that, that will bounce back to above the 15% benchmark. And with the strong performance expected in open services with a deliverable order book in-build, we expect that again to achieve its own minimum benchmark of around 10% certainly in the second half. So whilst aspects of this is slightly disappointing in terms of the overall performance, underneath that, we are actually very pleased when it's compared to the comparatives. And we believe, again, we've achieved above-market share gains overall. In terms of -- moving forward, in terms of our overall strategy developments, these are all key planks of what we've been trying to achieve over the last 3 to 4 years. Just to remind everybody, we took a disparate 26-site, 16 trading brands, a group of independent trading profit centers that was fit for purpose exactly for its market. But our view was that with the increasing online presence, the amortization of life, use of digital information to connect together, the 11,000-customer set that we had, we had to change our strategy. And we've been focusing very clearly on creating 2 very clear off-line brands in Flowtech and the Fluid Power Group, enhanced by a single online presence of Flowtech, all revolving around a single product set. So in terms of the major developments during the course of this year, we told all that on the 4th of January this year, we created a single Flowtech organization by the aggregation of the legacy brands we had and creating a one-stop shop for all that particular customer set. Over GBP 50 million of sales operating through one e-commerce site through 3 logistics centers at the time, now through 2, following the closure of the Leicester site. In July this year, that was enhanced with the integration of the team from the former Primary Fluidpower Components group. This is a hydraulics offer and, therefore, creates a much broader base to that segment of the Flowtech operation. Again, now all that are one system, operating through effectively one site. And we've been able to introduce the 20 new hydraulic ranges to the previous extensive offer that the Flowtech organization had. So again, another big step forward in our strategy on the 4th of -- 1st of July this year. Behind that, we've talked about the fact that Fluidpower Group is now well advanced in its creation. All the structural work is now complete. And we'll continue with the rebranding during the remaining part of this year to create a single brand, but focused around 2 particular segments of the marketplace, endemic across how the hydraulic sector is viewed with mobile and industrial applications. And again, all of which are enhanced with productivity gains that can be garnered from driving small accounts through the online presence, flowtech.co.uk. So all the businesses within this sector currently have no online presence at all other than information-only websites, so we see we're going to get a natural marriage between the capabilities that we've got across the group. That is now all enhanced with our new website, which went live on the 17th of May and has gone through subsequent revisions of new extra bells and whistles, so to speak, coming online. And we expect by the end of September 9, sprints will have been introduced to further enhance its capabilities. We've -- it was slower in terms of introduction. We spent a lot of time making sure its integrity was strong. We've now gone through 3 months post integration dealing with various minor teething problems. But we're very pleased overall with the resilience that is now being shown, yet improvements continue -- can continue to be made. But overall, that is in play. And it's now, for the first time, allowing us to enhance some of the search engine optimization techniques that previously we weren't able to use. We started to put these live in the early part of August, and we're certainly encouraged by the initial reaction that we've had. So average search rankings are starting to improve from a pretty low base, it has to be said, and since inception in early August, again, we're quite pleased. As ever, this has to be a relentless part of what we do. It will not be a one-stop fix. It's going to take us months and years to properly get to the positioning that we believe can be achieved, but we're now on that particular journey. In other areas of activity, as Russell's touched on, the work that we began in early 2020, obviously at that point, we didn't appreciate just what was going to come and the difficulties of the COVID-19 period followed. This was all about warehouses, predominantly warehouse pickers in terms of head count. Our commercial colleagues are incredibly valuable as a solid resource. But the work that we've done is now starting to bear fruit. So we're now down at about 605 head count. We've got a further 17 head count reduction in Leicester that's been announced, is now in process. So we think we'll be down at sort of 590 into Q3. And thereafter, there's a sense that natural wastage will allow us to improve productivity over a period of time. But by the centralization of a lot of our activities around the Skelmersdale's campus, we believe we'll be able to further improve that. As we talked about here, the 8 sites in total have been removed. It has to be said it's now dealing with a considerable additional stockholding burden that's been a necessity out of the supply chain disruption we've seen post pandemic. That's meant we've got considerable overflow stockholding, particularly in the northwest of England. But all areas that we believe we can deal with, we've shown resilience both in our commercial activities and in terms of the capabilities of our management team over the past 3 years, and that will be further reflected in our 2022 late half year performance and into 2023. So overall, the key planks of what we're looking to achieve have continued to be put in place as we strive to ensure that this platform is in place. Say, 2 off-line branding styles, Fluid Power Group and Flowtech, and a single online trading platform, flowtech.co.uk, that has the capabilities to go further afield into Europe under that same infrastructure. In terms of our key achievements, yes, we've grown operating profits with solutions achieving record highs. We've improved our gross margin. Yes, there's element there of selling old stock at new prices. But what's very pleasing, if we look at August as a snapshot month-to-date, our margins are above where they were a year ago. Our e-business trading platform is now built and in live and will be relentlessly improved as we sort of move forward. We've integrated our Flowtech organization under the 5 to 1 project. And in terms of overall productivity improvements, picking efficiencies, buildings and infrastructure, a lot of that work is now complete, and we look forward to the second half of the year and ensuring that we complete that particular program to leave us, I would say, with a fresh platform for the start of 2023. In terms of outlook, obviously, we're all aware of the current widespread uncertainty. Our focus remains on ensuring the key pillars of our long-term strategy are in place, and we'll ensure that we maximize all the opportunity to protect our profitability and ensure that the risk environment that we currently face, we can deal with. I think we've shown that since the start of the pandemic period. As I say, we came through that without recourse to external finance. We've operated within our means. We've used our capital wisely. We've got the most extensive stockholding position the group has ever had and certainly our sector has ever had and we'll ensure we continue to use that as a position of strength moving forward. Okay. Overall, that completes the basis of our presentation. Jake, if I could pass back to you to see whether we've got any Q&A coming through.

Absolutely. Bryce, Russell, thank you very much indeed for your presentation this morning. [Operator Instructions]. But just while the team takes a few moments to review those questions that were submitted already, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. Bryce, Russell, as you can see, we have received a number of questions for our today's presentation, so thank you to all of those on the call for taking time to submit their questions. If I could please just hand back to you to run through that Q&A tab. And where appropriate to do so, if you could please just read out the questions and give your response, and then I'll pick up from you at the end.

Okay. Well, Mark is asking the question about supply chain. In terms of improvements in supply chain, there are 2 elements to this. There's the length of lead time and there's the volatility. In other words, you place an order for 6 months' time. And in 6 months' time, the supplier says, sorry, we can't send it, it's going to be another 3 months and you're only going to get half. So I'll deal with the first element of that in terms of lead times. No, we're not seeing any improvement. But overall, at least they are consistent, so you can work within them. That means you have to, yes, keep more buffer. But at least our major supply partners are acting consistently from that perspective. If I then deal with the volatility aspect, for those elements that come from China, which is about 25%, again, I would say that is pretty consistent now. So again, we can operate within certain defined parameters. In terms of our European partners, say, 75% of our supply, again, that has some consistency. But to some degree, there is still a rationing of most aspects. So if you place orders for 100%, we're getting fairly early warnings that, yes, we might get 70% of it. Now that has a knock-on effect straight through into our -- particularly our OEM partners in solutions. So has it improved? Yes. Is it improving in terms of allowing us to significantly reduce our stockholding position? I would say no, there's still quite a lot of work to do in that particular area. Russ, you deal a lot with the sort of stock side of things. Is there anything in particular to add to that?

No, there's a second element to Mark's question about what can the company do to ensure it meets demand. I think the only thing I'd add to your answer, Bryce, is that we do have a lot of people with layers of technical expertise within our organization. So there have been examples of where a customer has traditionally required component A, B, C, but our guys have been able to say, well, I know you've used that for the last 10 years, well, why don't you try component P, Q, R, they'll sort of do the same job. So we sort of had some creative thinking and worked effectively with our partners, our customers. And if anything, by doing that, of course, it strengthens the relationship. So as I alluded to earlier on, notwithstanding what Bryce says about, it's still a challenge, but at least it's a consistent challenge. We do have different layers of planning in place to achieve an inventory reduction to obviously assist with the debt reduction in the second half year, notwithstanding what Bryce has alluded to. We signposted a few years ago, pre-pandemic, an ambition to achieve, we called a Turn/Earn Index of 130, which is the multiple of gross margin and stock turn, so that goal, the ambition on stock turn is 3.5 or thereabouts. And that remains the case, to be honest. We probably were somewhere between 2 and 2.5 at the moment. Doesn't mean we can't get there if or when the world as it becomes normal again.

Okay. In terms of the timing and passing of input price increases, again, there are different aspects. One thing it's probably fairly easy for people who aren't familiar with us to think is that we have a narrow group of products. Our price goes up, we pass that through because we're the only source of supply. Well, in reality, we're not. It's a huge range of products from a very widespread number of suppliers. And in many respects, key customers, particularly in Flowtech and the MRO side, have direct supplier relationships with many of those major manufacturers themselves. So we can sort of fill in for the embarrassment stock type of item. So you've got -- you've got a wide breadth of stocks, you're turning your stocks twice a year. If your price comes through with an increase from, say, Danfoss and you've sat on 3 to 6 months of stock of that particular product, you may choose not to move that through if the market isn't quite going as quickly with it. However, you may have a situation where you're the sole source of supply to an OEM and their product is scarce. And if the supplier puts the price up, you put it straight through to the manufacturer on the other side. So just to remind everybody, we have no contractual committed pricing positions with any of our customers. All is by commercial negotiation, depending on all the sources of supply. But if you wanted a very broad sense of how quickly we can pass things through, it would be between, say, 1 and, say, maximum 6 months, depending on the depth and the breadth of the stock that we've got. So if you look, since strong price pressure started to kick through probably back end of Q3, certainly Q4 last year, we've been progressively moving prices through. Even in Q2, there were several suppliers increased prices again. They were all passed through on the 1st of April in parts of the sort of Flowtech range. Again, Russ, anything else?

No, I think the key point is the fact that we're not bound into any prices. We can think the only answer to the price setting is something which the guys consider on a daily basis really.

Again, in terms of visibility, Flowtech has very little visibility. Probably 90% of its sales tomorrow, it's a next-day offer. It does have elements of its order book with some pneumatic customers that back-to-back with OEMs themselves, you get a little bit of foresight there. Solutions, a lot of that is supplying into OEMs. So it may have 1 week to 3 months of production schedules that we have to provide kicks through. But again, it's not a committed order. It's a sense of what they want us to stock and they can remove that advice at pretty short notice, but there is some sense of visibility there. So solutions moving forward. And then in services, yes, there's an element of repair in some of the work that the on-site teams do. But probably about half its sales, it has decent visibility of what's required with deliverables. We use the term scheduled deliverables in the second half of this year. It gives us quite a lot of confidence about the financial performance there. But ultimately, you can make a 20,000-pound hydraulic power unit with a scheduled delivery of the 4th of November. And if the customer says, actually, no, can you now deliver it and make them deliver it in December? You've got to try and work within that. So yes, we do have a decent degree of visibility there, but none of it is, particularly, I'd say, a contractual committed position. It's what we're used to working with, and that's within the nature of being a wholesale distributor. In terms of the features and functionality of the e-commerce website, the old website, if we could use that terminology, was pretty much an order portal through to our long-term customers. They were used to it. They would know their particular products, they could input fairly quickly and efficiently. So a huge change that is now in all routes to market sort of website is the ability to search for products. That in itself isn't transformational. It will take a longer period of time. So as the SEO work kicks in, we get an improvement in our ranking positions. We'd like to pick up more of the sort of floating search-driven sales. So many aspects of its capabilities are focused around those particular areas. There are particular changes that will help with our current customer base. So the scheduling of call-off orders, so we do have certain customers who like to place bulky orders that they can pull down from on a monthly basis. There's much more functionality that's been added from that particular aspect. But probably the bigger change, the sea change is actually in the engineering underneath this. The capabilities of attaching this website to multiple ERP systems is now much more fluid for us, excuse the pun there. The ability to connect that to the databasing aspects, the marketing campaigns, the personalization software, fresh relevancies of products that we're working with and on, that's probably the key bit. So it's the lead generation work both in off-line sales, e-mail marketing campaigns. And the exciting element for me is in our offline world. I never lose focus of the fact there we are GBP 120 million turnover business. The certainty is bread and butter over decades dealing face-to-face. So it's the off-line lead generation I'm actually quite excited about, making that a much more efficient proposition. And that's where the CDP, the customer data platform, and everything that comes with it, we're excited is now starting to come on stream and will give us some very positive, let's call it, information in Q3 and Q4 as it starts to come on stream. And therefore, we take the off-line -- the online touch point, sorry, that come through the new web architecture and all the capabilities. With the off-line data points, we've got through a streamlined organization. So we've got a lower number of systems now. The Flowtech now with Primary has GBP 60 million of sales, circa 4,000 customers live, something like 10,000 customers over the last 3 to 4 years. And I was quite staggered with some of the initial feedback from the CDP, which has gathered 10 years' worth of data. And there's something like 47,000 customer records that we've had touch points with across the organization. That's the bit that's actually equally exciting on top of, let's call it, the transactional capabilities of the new website. One of the targets are on percentage of online sales. Well, I'll reiterate, as an organization in Flowtech, it's always taken about, in total, now about 56% of sales through online means, but it was a pure order portal with established customers. We believe that will increase, obviously, from 56% and overall target may be around sort of 70%. But probably more pertinent is just in the U.K. and Ireland, we believe there are about GBP 60 million, so circa 5%, 6% of the total market, there's a pure search-driven transactional sale that previously we did not have access and exposure to. So we've got a -- we're going from effectively nil market share there to hopefully something that's considerably north of that. However, if you also throw in that in European markets, our online presence is effectively nil at this given point in time. So by building an infrastructure around a single PIM, product information management system, that is populated with the digital media of all our major supply partners. Again, it's quite exciting in terms of the organic growth that, that could play when we expand across all the geographies. Clearly, behind that, you've got to have the operational infrastructure to support that. But our view is let's start by getting very strong and tight in the U.K. and Irish markets. Let's get our online platform working efficiently. And that gives us plenty of scope for organic growth in the future. Energy bills, Russ, maybe you want to...

Yes. I mean, the headline answer is relatively, stress the word relatively, relatively modest. It's not like we make a load of stuff about, it's complicated as it gets. It's assembly of power pack units. But not seeking to underplay it, and so it's relatively modest, measured in hundreds of thousands rather than multimillions. But clearly, when we look forward with that sort of expression to 2023, we feel we've done a pretty good job of managing the 2022 inflationary pressures. We're probably going to have to do an even better job of managing 2023 inflationary pressures. We have been working for years actually with a specialist organization to ensure we get the best deals from utility providers. But clearly, the best deal we can get in the back end of 2022 looks awful to what we could have got a couple of years ago, so we are aware of it. We're managing it relatively modest, measured in a few hundreds of thousands rather than multimillion.

Mark has asked about FIFO accounting, flattering profit growth. This is my comment about selling old stock at new prices. Undoubtedly, there has to be an element of that feeding in. I've been in wholesale distribution for over 25 years. You live inflation from that aspect. But the bit that gives me, like I said, some sense of confidence is, we're very particular about tracking gross profit margins percentages year-on-year. In other words, comparing exactly, so we're at day 21 of a 22-day trading month. Russell and I know exactly where our GP percentage sits against exactly the same working day a year ago. And we've disclosed in our RNS that we're at or above that particular rate. So given as our stock turn is just over 2 and a lot of our stock is relatively new in the last 6 months plus, given as we're now in August, we're not selling old stock at sort of new prices to some degree. We're selling what has been acquired post the inflationary period into current marketplaces. There's always a sense of, have we been overly aggressive in matching that through? Could we may be slightly depress our price and margin expectations to pull some of the strong stock position that we've got through? But that's in the nature of being a distributor, you have to balance those particular things off. That's a business-as-usual activity. I would say in a set of circumstances that aren't particularly business as usual, but we're getting pretty much used to that over the last sort of 2 to 3 years with everything that's been thrown at us. Russ, do you want to get maybe...