Intertek Group plc (ITRK) Earnings Call Transcript & Summary

Hello, and welcome to the Intertek 2022 Full Year Results Conference Call. My name is Laura, and I will be your coordinator for today's event. Please note this call is being recorded. [Operator Instructions] I will now hand you over to your host, Andre Lacroix, to begin today's conference. Thank you.

Good morning to you all, and thanks for joining us on our call. I have with me Jonathan Timmis, our CFO; and Denis Moreau, our VP of Investor Relations. I'd like to start our call today recognizing all of my colleagues at Intertek for having delivered a robust performance in 2022. 2022 marks another year of consistent delivery with revenue and EPS in line with expectations, which demonstrates the high quality of our growth earnings model. There is no question that 2022 was more challenging than expected. The global economy was impacted by the compounding effect of 3 consecutive shocks in the last 3 years: the global pandemic, a major disruption of the world's supply chain and the return of inflation. There are 5 takeaways in our presentation today. First, we saw a higher demand for ATIC solutions with mid-single digit like-for-like revenue growth at constant rate. Second, our full margin was robust at 16.3% with a strong H2. Third, with even double-digit EPS growth at actual rate, both our cash flow from operations was strong and grew by GBP 26 million. And finally, we delivered an excellent ROIC of 18% with year-on-year progress at constant rate. Let's start with our performance highlights. We've delivered indeed a robust performance with group revenues up 8% at constant rate and nearly 15% at actual rates. Like-for-like revenue growth of 4.9% at constant rate, operating profit up 4% at constant rate and nearly 10% at actual rates, robust operating margin of 16.3%. EPS growth of 4.6% at constant rate and 10.6% at actual rates progressed on ROIC at constant rate and unchanged full year dividend at 105.8p. Let's now discuss our like-for-like revenue performance. Globally, we saw an acceleration of our momentum in trade and resources outside of China. Our like-for-like revenue growth was 6.5%. Our Products division delivered a good like-for-like revenue growth of 3.9%, notwithstanding the impact of COVID-19 in Q2 and Q4 in China, the supply chain disruptions in the automotive industry and the slowdown in new product development in Softline and Hardlines in Q4. Our Trade division delivered a like-for-like revenue growth of 5.6% as we benefited from the increased demand for energy and Agri products. Our Resource division reported like-for-like revenue growth of 7.9%, driven by higher CapEx investments from our energy clients and by the higher demand in Minerals. Before we discuss margin and cash, a few remarks on our November, December like-for-like performance, which was slightly below our expectations. We knew that the November, December like-for-like revenue growth would be impacted by 1 less working day and the expected slowdown in Softlines and Hardlines, but our performance in the last 2 months of the year was impacted by a high number of COVID cases in China. Adjusted for the GBP 5 million revenue loss in China due to COVID, our like-for-like revenue growth in November, December was mid-single digit. Indeed, after the relaxation of the COVID-19 restriction, the level of COVID-related sickness in our China business was high in November and December but was back to normal in the first week of January. You will have noted that we have shown as a reference in November, December like-for-like for 2021, which was demanding in terms of comparable for products and trade. We have delivered a robust margin of 16.3%, which was down as expected year-on-year by 70 basis points at constant rates due to the COVID issue in China in Q2 and Q4, higher-than-expected inflation in many of our markets and the fact that margins benefited from higher than usual government subsidies in 2021. We are pleased with the strong margin progression we saw in trade and resources. Margin accretive revenue growth is central to the way we did evaluate Intertek in each part of our portfolio. And moving forward, we are targeting margin progression. We pursue a portfolio strategy that focuses on quality growth initiatives based on the right volume price and mix benefits. Our superiority customer service gives us a strong pricing power. And following the good pricing performance we saw through 2022, we have taken additional pricing that will be beneficial in 2023. Assurance, which now represents 20% of our revenues, is gross and margin accretive with excellent growth opportunities. We pursue a disciplined capital allocation approach, and our performance management discipline is based on well embedded, continuous improvement processes. As part of this, we are announcing today a cost restructuring program that targets productivity opportunities based on operational streamlining and technology upgrade initiatives to deliver GBP 6 million to GBP 7 million cost reduction in 2023 with an annual saving of GBP 15 million when the program is complete. We've continued to make progress on cash management in 2022, Our cash from operation of GBP 722 million was up year-on-year by GBP 26 million, which enable us to invest in growth while still operating with very strong balance sheet. We pursue a disciplined approach to investment in growth. Our M&A strategy targets investments in attractive growth and margin sectors to augment our organic growth. The 3 recent acquisitions we made, SAI, GLA and CA, are performing well and added GBP 153 million of margin accretive revenue in 2022. Our pipeline of potential acquisitions is healthy. Investments in innovation are essential to deliver superior ATIC customer service. Our teams are focused on scaling up our winning innovations while working on a next generation of industry-leading solutions. We have operationalized these investments successfully over the years, as evidenced by our excellent ROIC. Sustainability is an exciting growth drivers, which we'll discuss later. Internally, we are focused on sustainability excellence in every operation. We are targeting net zero emission by 2050, but sustainability is much more than at 0. We also focus on customer satisfaction, diversity, inclusion, health and safety, compliance and engagement. I will now hand over to Jonathan to discuss our full year results in detail.

Thank you, Andre. All the comments I will make will be on the adjusted results. In summary, in 2022, the group delivered a robust financial performance. Total revenue growth was 8.2% at constant currency and 14.6% at actual rates as beneficial movements in FX rates impacted our revenues by 640 basis points driven by the weakening of sterling. Like-for-like revenue grew at 4.9% at constant rates. Operating profit at constant rates was up 3.8% to GBP 520 million, delivering a margin of 16.3%, down year-on-year by 70 basis points. Diluted earnings per share were 211.1p, growth of 4.6% at constant rates and 10.6% at actual rates. Turning to cash flow. Adjusted cash flow from operations was GBP 722 million, up GBP 26 million year-on-year. Adjusted free cash flow was GBP 386 million, down year-on-year by GBP 16 million. We invested GBP 117 million in CapEx, GBP 18 million above prior year and finance costs were GBP 10 million higher. We finished 2022 with financial net debt of GBP 738 million, in line with prior year, which represents a financial net debt to adjusted EBITDA ratio of 1.1x. Now turning to our financial guidance for 2023. We expect net finance costs to be in the range of GBP 40 million to GBP 45 million. We expect our effective tax rate to be between 26.5% and 27.5%, our minority interest to be between GBP 21.5 million to GBP 22.5 million, and CapEx investments to be in the range of GBP 115 million to GBP 125 million. Net debt guidance for M&A is GBP 630 million to GBP 680 million. I will now hand back to Andre.

Thank you, Jonathan, and let's discuss the performance of our business lines, starting with Products. All comments that we make in the section at constant currency. Our Products division delivered a good performance on [indiscernible]. Notwithstanding the impact of COVID-19 in Q2 and Q4 in China, the supply chain disruptions in the automotive industry and the slowdown in new product development in Softline and Hardlines in Q4. Outside of China, our like-for-like revenue growth was 5.5%. Our like-for-like performance was driven by double-digit like-for-like in Business Assurance, mid-single digit like-for-like in Softlines, Building & Construction, low single-digit like-for-like in Hardlines, technical [indiscernible] and high single-digit negative like-for-like in Transportation Technology. Operating profit of GBP 427 million was stable year-on-year and as a result of 21.1% decline, 180 bps year-on-year, reflecting the COVID-19 disruption in China and the inflationary pressure in North America, Europe and Australia. In 2023, we expect our Product division to deliver good like-for-like revenue growth. Our Trade divisions delivered like-for-like revenue growth of 5.6% as we benefit from the increased demand for inspection and testing in energy and Agri products, while the performance of our GTS business reflected the decision to terminate 2 unprofitable contracts. Outside of China, our last [indiscernible] operating profit was up 14% to GBP 58 million, resulting in operating margin of 9.1%, 70 basis points higher. We expect our Trade division to deliver good like-for-like revenue growth. Our Resource division delivered like-for-like revenue growth of 8%, driven by increased CapEx investments by [indiscernible] oil and gas and renewables as well as high demand in Minerals. Outside of China, our like-for-like revenue growth was [indiscernible] 61% higher than [indiscernible] producing in [indiscernible]. Let's now discuss the growth opportunities we have. We've made a lot of progress [indiscernible]. Within our 3 divisions, products has been the fastest growing business with a CAGR of 9% and today represents nearly 2/3 of our revenue and 82% of our profit. Within our ATIC solutions, Assurance has been the fastest-growing business at 17% compound, representing 20% of our revenue. Our portfolio is extremely well positioned for growth and let me explain you why. COVID has been much more than the tragedy for the world. In the post-COVID world, stakeholders' expectations in quality, safety and sustainability are higher, making the case for respace Quality Assurance stronger. The demand for ATIC solutions will grow faster post COVID. Our industry is highly attractive, of course, with strong structural epic growth drivers that will deliver GDP plus like-for-like revenue in real terms. Based on our customer research, these attractive structural growth drivers will be augmented by an increase in new clients, higher investment in safer supply, higher investments in innovation, the step change in sustainability and high growth in the world of energy. We are seeing significant growth in a number of companies globally, given the lower barriers to entry for any brand with e-commerce capabilities. The lack of Quality Assurance expertise of these young companies is excellent news for our global market access solutions, and our decentralized customer-first organization has a strong track record of winning new clients. COVID-19 is proving a catalyst for many corporations to improve the resilience of their supply chains. We are seeing a change of focus within our clients with better data on what is happening in all parts of the supply chain. Tighter risk management with razor-sharp business continuity planning, a more diversified portfolio strategy with Tier 1, Tier 2, Tier 3 suppliers, a more diversified portfolio strategy also regarding factories. And of course, investment in processes, technology, training and independent Assurance. Our superior Assurance offering means we are well positioned to help our clients reduce the intrinsic risks in their operations. Our clients have also realized that they need to invest more in product and service innovation to meet the changing needs of their customers. A recent survey by Gartner show that 60% of R&D leaders expect to increase the R&D investments in 2023. These investment in innovation has been a higher number of SKUs and a high number of test per SKUs, which will be beneficial for our Products division. The other major area of investment inside corporations is, of course, sustainability. We are seeing positive momentum with new and emerging regulation that means that companies will have to reinvent the way they manage the sustainability agenda with a great emphasis on independently verified nonfinancial disclosures. This is excellent news for industry-leading total sustainability Assurance solutions. The growth opportunities in the world of energy are truly exciting. In 2022, we have all witnessed the concerns reflecting energy security, and everyone agrees that global energy production capacity is an issue that needs to be addressed quickly to meet the growing demand for energy. Given the underinvestments in traditional oil and gas exploration production in the last decade and the lack of scale for renewables, investment for production in traditional oil and gas and in renewables will increase. This is excellent news for Caleb Brett and Industry Services businesses. Moving forward, we'll continue to deliver sustainable growth and value for all of our stakeholders. Our science-based customer excellence USP provides our clients with the ATIC advantage they need to strengthen their business. We operate a high-margin capital-light carbon-light and highly cash-generative earnings model. Intertek's approach to value creation is based on the compounding effect year-after-year of margin-accretive revenue growth, strong cash generation and disciplined investment in growth. That approach has delivered 8% annual TSR since 2012. Moreover, our earnings model has strong intrinsic defensive characteristics. The ATIC solutions we offer are solutions [indiscernible]. We enjoy strong and lasting relationship with our clients. Our business model is based on a number of quality, safety and sustainability [indiscernible] make an existing SKU as well as a number of new brands and SKUs that are being launched in [indiscernible]. Our Trade business grows in line with GDP type [indiscernible] is well positioned for growth given the lack of investment in traditional oil and gas in the last few years and the need to scale up renewables. We are truly excited and need to think about the growth opportunities ahead. Our good to great journey, which has delivered significant value between 2014 and 2022, continues capitalizing on our USP, the Intertek science-based customer excellence TQA advantage. On May 3 and 4, we will host the Capital Market Day in London, which will give the opportunity to the entire leadership team to present our Intertek 2030 growth strategy. True to our purpose of bringing quality, safety and sustainability to life. Our science-based customer excellence TQA advantage helps our clients to make the world ever better. Our unique approach is based on 3 components. First, it's about our science-based technical expertise. Our industry leading processors build the world's best intellectual property to deliver superior TQA solutions. Second is our commitment to science-based continuous improvement. We always go back to the data to ensure the solutions we offer to our clients are based on the best possible research, knowledge and insight. And third is, of course, our science-based innovation. We continuously apply superior data-driven insights when creating new solutions for our clients. Let me give you a few examples to illustrate what I mean. Our medical device experts support the development of artificial sites to the blind. Intertek calibrate is supporting the development of synthetic fuels for the airline industry. Our IB World business has developed innovative DNA testing tools to assist the [indiscernible] industry. Before taking your questions, I'd like to share our 2023 guidance. We're entering 2023 with confidence given the reopening of China, the increased demand for ATIC solutions, the strength of our portfolio, our strong pricing power, our productivity and cost initiatives as well as our cash discipline. We expect the group will deliver mid-single digit like-for-like revenue growth at constant currency, driven by good like-for-like in product and trade and a robust like-for-like in resources. We are targeting margin progression both in H1 and H2. Our cash discipline will remain in place to deliver strong free cash flow. We'll invest in growth with CapEx between GBP 115 million and GBP 125 million, and we expect our financial net debt to be in the range of GBP 680 million to GBP 680 million. A quick update on currency for your models. The average sterling rate since the beginning of the year applied to the full year results of 2022 will be broadly neutral at the revenue and earnings level. In summary, we are a purpose-led company offering ATIC solutions that are mission-critical for the world. The growth in our end market is accelerating. We operate a strong portfolio with leading market positions. Our high-performance earnings model has a strong track record. We are a high-quality growth business, creating sustainable value for all. Thank you for your attention. We'll now take any questions you might have.

[Operator Instructions] We'll now take our first question from Rory McKenzie at UBS.

Two from me, please. Firstly, can you quantify the impacts on margins from the disruption in China? And you obviously disclosed it was a 160 bps drag on revenue. If we were to assume a 50% incremental margin on that lost work, that would account for all the declining group margins, I guess. So can you help us understand margins outside of China? And then secondly, can I ask why have you decided to go ahead with a restructuring program now? You've talked in the past how it was important to keep capabilities impact and you've been doing restructuring over the past year. So just interested on what's changed? And maybe you can talk more about where you're trying to direct this current restructuring effort?

Yes. Thanks. Look, on China, we've been obviously quite transparent in terms of the impact that China had in Q2 and Q4. Of course, we have not quoted any number, but you can make an assumptions between the like-for-like growth differential at the group level and the like-for-like growth without China. There is no question that the disruption we had in China was significant in revenue and margin. As you know, we don't disclose our margin for China. But when you lose GBP 1 million in China, you've got, of course, a negative flow-through because you cannot basically get rid of your fixed costs, right? You've got to be ready for your customers. So it has been significant. Indeed, I'm not going to say much more than that because then I'll get into selected disclosures. But this is something that has been very, very tough for our China team and for all of us as the numbers, obviously, that you've talked about described. As far as the restructuring is concerned, I think it's a very important question. Look, as you know, the way we run the company, right, is really about continuous improvement, Kaizen, call it ever better. And there is nothing at Intertek that we believe cannot be improved. Let's see the spirit that we operate in. And essentially, we believe that we have an opportunity to streamline some of our operations. And what I mean by operations is essentially site consolidations, noncustomer-facing overheads that are supporting the business around the world as well as technology as we upgrade our digital footprint around the world. So that's the approach we are taking. Obviously, we did a bit of portfolio restructuring when I arrived in 2015, and we believe we have the opportunity to improve the margin by being simply more efficient.

We'll now take our next question from Will [indiscernible] at Goldman Sachs.

It's [ Will Kanika ] from [indiscernible]. I just had 2 questions, if that's okay. So firstly, I just wondered if you could talk about the pricing element on group organic revenue growth, sort of how you ended the year or maybe how you see it for '23. And then secondly, just looking at Building & Construction in products. It looks like it slowed towards the end of the year. I just wondered why that was and the outlook isn't better. I think I understand this is mostly a U.S. business, where I would have thought there's sort of quite good support in that space.

Yes. Look, in terms of pricing, as you know, we take a very considered approach to pricing. It has been our strategy over the years to pass 60% of the wage increases through inflation and cover the rest through productivity initiatives of growth last year was a different year for all of us around the world. But our organic revenue performance was 1/3 pricing, 2/3 volume, which we believe is the right mix. And as far as B&C is concerned, look, I wouldn't worry too much about B&C. Yes, there was a bit of a poor weather in some of the regions in North America in November, December, but the business is in good shape. And given the investments that the government is doing in the U.S. in green infrastructure, I think we continue to expect some really, really exciting times for our business. So I wouldn't read too much into that.

We'll take our next question from Suhasini Varanasi at Goldman Sachs.

So just a couple for me, please, both around the margins and the SDIs. You've indicated that you booked the cost in '22 and it's going to get implemented over the course of '23. Do you see the full impact of the GBP 15 million by '24? I just wanted to clarify that, please. Sorry, if I missed that. And the second one is on the margin progression that you're forecasting for 2023. Can you please talk about the moving parts? Because I think on the positives, you basically have the cost-saving program, you probably have China reopening potentially, obviously. And maybe on the flip side, you have maybe some of the mix effects with resources growing a bit stronger, maybe some inflation, et cetera. So just if you could talk us through the moving parts and how you see margin procession getting up effective by these factors.

Okay. Thanks. And I hope I heard your question well, the line is a bit difficult. But in terms of the restructuring program we've announced, we basically are targeting a full year annualized benefit of GBP 15 million. But as you know, when you make a decision to do certain restructuring activities, you obviously need to book this in your P&L, which is what we did at the end of 2022 when we made the decision. But there is a time to implement that, and the benefit in 2023 will be GBP 6 million to GBP 7 million. So you're absolutely right, there will be additional benefit in 2024. Look, in terms of the various moving parts on margin. Look, what I would say beyond the obvious fact that if China was obviously dilutive to the group in 2022, with the reopening of China, there is a benefit in 2023 that we should expect. That's obviously obvious for all of us. I think the fundamental point about the way we manage the company is that margin accretive revenue growth is basically the way we run every single operation around the world. We are of the opinion that when you are a high-quality growth business model, and you've got some strong pricing power to make sure that you've got margin equity revenue growth discipline in every single operation is super important And it starts at every single site as we talked in the past. So look, of course, we have span of performance. Not every business unit at Intertek is delivering margin equity revenue growth every single month. We understand that when you run a group like ours, but that's the approach we take. So to your question about the moving parts in addition to the positive effect this year that we expect from the rebound in China, we'll continue to motivate, energize and manage the portfolio to target margin equity revenue growth in every single business with the right strategic focus in terms of which segments we invest in, the right operational discipline in making sure that we deliver superior quality for our customers to justify our pricing power. The very, very important pricing disciplines to make sure that we don't undermine the future earnings models for the company because that's what happened when you start reducing price. And it goes without saying that with a very strong discipline in terms of fixed and variable cost management. And as you know, we run the company with a very comprehensive performance management approach with our 5x5 metrics, financial and financial in every single site. And as I've said many times on this call, the good news at Intertek is that data is what we are all about, and there is nowhere to hide. So we know exactly where the opportunities are. Having said that, we are not perfect and there's more fuel in the tank.

Sorry, I meant that when you think about the cost saving program, which probably adds about 20 bps to your margins in '23 and you have China reopening, which is a tailwind to your margins, that's the upside. And your margins can actually go up maybe 40, 50 basis points on a year-over-year basis. But are there offsetting factors that can get the margins down? So for example, do you have wage inflation, do you have negative mix effects, do you plan incremental headcount investments that can potentially limit the margin expansion for '23. That's where I was going.

I mean, of course, we always invest in growth, and this is part of the portfolio approach we take. And of course, if you look at our guidance, resource is a low-margin business. We expect resources to grow faster than the rest of the group. And there will be, of course, some mix effect from that. But net-net, we believe that the margin is in a good place for 2023. Okay?

We'll take our next question from Sylvia Barker at JPMorgan.

Can I ask one quick follow-up on restructuring, please? Just could you clarify where are the site consolidations kind of happening? Is it impacting any particular region or business line specifically? Then secondly, on Business Assurance. It seems like both ISO and more bespoke sustainability type checks have been growing well. Could you maybe give us a bit of an idea of the trends within Business Assurance and then maybe some of the more big differential there. And then finally, you make a comment in the statement that you medium term, expect margin progress for the business going forward. I guess it's a difficult one because it's such a portfolio of business. Could you maybe talk about why you think that overall, for the group, you can see margin progression over the medium term?

Sure. Thanks, Sylvia. On the sites, so we -- the program we've announced this morning is covering around 24 sites and offices. And then about half of these will be in North America, just to give you a sense. As far as Business Assurance is concerned, look, we are tremendously pleased with the performance double-digit revenue growth, we believe that we continue to take advantage of essentially 3 type of growth. The standard, if you want, ISO certification that obviously is very important because companies need to have the independence on their standards. The non-ISO audit, which is essentially what I call supply chain resilience. And this is all about independently auditing the risks in your operations. And as you know, we are very, very strong in CSR, for instance. And then finally, sustainability where there is no question that companies understand that they need to identify their sustainability risk, both from an operational standpoint, but also from a corporate standpoint. And they are getting better organized. They are trying to manage this complexity of multiple requests from different proxy rating agencies in terms of disclosures, and it's creating a lot of additional work for them. They're all, of course, looking at net zero and understanding what it takes to achieve net zero, Scope 1, 2 and 3, direct 3 and indirect 3. And then financially -- finally, sorry, all the disclosures that are going to be independently verified. And we've talked about on this call, the importance of CSR in Europe. And as you know, Europe is ahead of the rest of the world and what is going to happen for all companies in Europe is going to be significant in terms of the need for independently audited nonfinancial accounts. So that's really, really, really important for our Business Assurance business. So this is why we're doing so well, and that will continue, of course. As far as margin, I mean, the reason why we believe that in the short, medium and long term, the group will be margin accretive revenue growth is essentially based on the way we run the company, as I just explained to the previous colleague on the call. But maybe if I were to go back in time. If you look at the progress we've made between '14 and '19, where we've delivered margin accretive revenue growth every single year, is a testament on how we run the company. And it doesn't need to be 100 bps every single year, but every 5 or 10 bps compound, and this is the beauty of our earnings models, right? So we are very, very confident because it starts with our portfolio strategy that is truly accretive. We focus on the high growth, high-margin sectors. As you know, product, which is the high-margin side of our business has got some very strong structural growth moving forward, and that will obviously help us. No question about it. Thank you.

[Operator Instructions] And we'll move on to our next question from Arthur Truslove at Citi.

So just firstly, on the product side. You obviously guided to good growth for 2023. And obviously, at the 10 months, you talked about challenges in the Softlines and Hardlines side of things, which I guess was due to sort of destocking cycle. Just wondering what you're seeing now in the Softline and Hardline side of things? And if you could give us a bit of detail as to what you expect to be better than good and what you expect to be weaker than good from the perspective of that division? Secondly, could you give us an idea what sort of wage growth are you actually seeing? And then I guess, thirdly, to what extent do you see the Trade division as having fully recovered now from a volume perspective, and I'm talking particularly on the oil side?

Thanks. Look, in terms of products, outlook for 2023, as you know, when we say good, there is a range. And unfortunately, we do not give guidance per business lines. But I'll give you the way we think about Softlines and Hardlines. There is no question, and it's public information for everyone that western retailers, U.K., European and U.S. retailers had overstocked their businesses as they went into the fall and winter season. And they were worried about a challenge of fewer demand and eventually higher competition from low-priced brands given some of the pricing that they took, and they went into, if you want, the season that for us started November, December, very, very, very carefully. Now in our business of lines, we basically produce for the winter until the end of March. So I don't expect any challenge in Softlines and Hardlines in the first quarter. I think, certainly, you've seen some peers here in London. [indiscernible] in the first quarter but [indiscernible] state the wage growth at a group level because we do it well. And we typically sure that over time, we maintain the [indiscernible] as the way we do that market [indiscernible]. As far as the Trade division is concerned, the fourth quarter was the supply and demand [indiscernible] all-time high compared to what we saw in [indiscernible]. It was not the case in the first, second and in the third quarter. So there is obviously a [indiscernible]. Beyond the peak that we achieved in 2019, our view is that the demand for oil and gas will continue to grow for many years to come. As you know, we have our own economic model in terms of supply and demand in all aspects of energy and while renewables is in still [indiscernible] less than 10% [indiscernible] oil and gas production for quite a long time. So we are delighted to be at the GBP 100 million plus, but there is much more to go.

We'll now take our next question from Karl Green at RBC.

Apologies, I think I missed a couple of minutes there. The sound quality deteriorated significantly. So apologies if I'm asking questions that have been asked already. I've got 3 questions. Possibly the final one for Jonathan because it's quite technical. But the first 2, Andre, just in terms of the essentially flat dividends announced or proposed year-on-year, just in terms of what that is always signaling around capital allocation, should investors be inferring that you've got some meaningful activity brewing in the M&A pipeline? Or any other comments about capital allocation in light of that flat dividend? The second question, if my maths are correct, then it looks like the Trade business a bit slow quite significantly in November, December. I appreciate it had a tough comp from the prior year compared to the other divisions. But just any incremental color you can add there? And then that final question for Jonathan, just in terms of the restructuring charges, it looks like over half the restructuring charges are technology-related asset write-downs. Just specifically, what exactly what systems were there that are getting written down? And is it fair to assume that you're going to get an immediate depreciation and amortization benefit from those write-downs and if so, what sort of magnitude, I mean, given the residual life back on those assets. I hope you heard all of that.

Yes, Karl, thank you, and sorry for the issue in terms of communication. So let me maybe fresh [indiscernible] with the last question that maybe you guys couldn't really basically [indiscernible] So in terms of [indiscernible] oil and gas...

Andre, I'm sorry to interrupt, but I don't know if other people are having the same issue, but your line is completely gone. It seems to be the same on the webcast as well as the phone. So I think the operator needs to address the sound issue, the answers are inaudible.

Can you hear me now or not?

Only just, Andre.

All right. Sorry for that. Can you hear us now?

Now yes, but it was really deteriorating earlier. It was -- we could hardly hear anything at all. Do you mind to speak once again, please?

Okay. Karl, can you hear me now?

Yes, that's better.

Okay. I can promise you [indiscernible]

Operator, that's gone again.

Yes, we still can't hear him again. It's gone. But they are still connected, Karl.

Operator, can you hear us now?

Yes, we can. Karl, can you hear them now?

Yes. Yes, let's try again.

Karl, can you hear me now?

That's much better. Yes.

Okay. Can I ask you did you hear the answer to my previous question on the Trade division performance, when I talked about the oil and gas supply and demand, or we need to start from there?

If you could start from there. I only got a couple of words, yes.

Okay. Good. So basically, what I was saying is that supply and demand in the oil and gas trading business is slightly above 100 million barrels a day, which is the peak that we saw in 2019. It was not the case in Q1, Q2, Q3. And therefore, the growth is going to be really, really positive for us in trade, in particular, with Caleb Brett. What I was also saying is that we have our own supply and demand economic model that looks at the long-range aspects of the world of energy. And while renewables is very important and investments are going to be very, very meaningful. It's still less than 10% of the global energy supply. So our view is that investments in traditional oil and gas production and exploration will continue. And of course, Caleb Brett will benefit from this continuous growth in traditional oil and gas production and supply. And as far as question about trade in November and December. Look, it was a very strong close for us, but we had a baseline effect as you can see on the slide, because November, December started seeing a rebound in oil and gas last year. As far as your question on dividend, a few years ago, your [indiscernible] 50% will continue to obviously [indiscernible].

We lost it again. You may continue now. We can hear you. Go ahead.

Karl, did you hear the dividend question -- the dividend answer?

That's where it cut down. I got all of the oil and gas on trade. That was great. And then it cut down when you started talking about dividend.

Okay. Dividend, let me just start again. So as you would recall, we changed our dividend payout policy a few years ago, and we moved to a 50% payout, which is our policy. And as the EPS improves over time, obviously, the absolute payment of dividends subject to the Board, obviously, final decisions, will follow this policy. So this is where we are, and we believe that 50% payout is a good approach given the investment opportunity we have organically and inorganically and that's the flexibility that we'll have to retain to invest in growth. Okay? Did you hear that?

I did.

Yes. And then, Karl, on the restructuring question. So as we said, that the restructuring covers sites and offices, head count and some upgrading and harmonization of technology. The overall oil cost is GBP 27.4 million. As you said, a component of that relates to asset write-offs across the 3 areas. So there is a relatively small impact from that going forward, but that's been built into the guidance and the numbers that we've already given.

Okay. So apologies on our behalf for the communication issues here. Hopefully, you've got all the answers you wanted to your questions. If you have any more questions, Denis is available. And thanks again for your time today. Apologies for the technical hiccup.

Thank you. Ladies and gentlemen, this concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.