IVE Group Limited (IGL) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to this IVE Group First Half 2023 Financial Year Results Webinar. My name is Tim McCown, and I'm your host for today. On the call this morning, we have Executive Chairman, Geoff Selig; CEO, Matt Aitken; and CFO, Darren Dunkley. The format is a 20- to 30-minute presentation followed by 15 minutes of Q&A. If you'd like to ask a question, please click the Q&A button at the bottom of the screen and type your question in the Q&A panel. Without further ado, I'd like to hand over to Executive Chairman, Geoff Selig, to start the presentation. Geoff, are you there? Over to you.

Thanks, Tim, and good morning on behalf of the team here to everybody, and thank you for taking the time to dial in this morning. We will be reverting and walking through the FY '23 H1 results presentation that was uploaded to the ASX this morning. Before we dive into that presentation, just a couple of opening remarks, it's just over 6 years since IVE Group listed and suffice to say has been a period of significant growth for the business since December 2015 and notwithstanding the impacts of COVID, which we managed very well as a business, notwithstanding the impacts. We've consistently and effectively executed on our strategic road map that from our perspective, has been well articulated and indicated. We delivered on our financial forecast with our growth underpinning a solid return to shareholders. And throughout, we've continued to maintain a strong balance sheet, which continues to put us in a position to pursue future growth initiatives. So it's been a very exciting and full 6 years, of which seems to have gone by very quickly. So this morning, we're very pleased to present our results for the first half of FY '23 and certainly a half of significance given the acquisition of a major competitor Eaton and the results for the half being well up over PCP. So if we can just look at the dashboard snapshot of the financial performance for the first half on Page 3. I won't go through all of them in detail because we'll talk to them through the course of the presentation. But suffice to say, across revenue, EBITDA, NPAT, EPS and the dividend all up significantly over PCP, which is very pleasing and encouraging. So we will spend the rest of the presentation, diving a little deeper into those metrics. And at the end, I'm happy to answer any questions people may have. So at this point, I will hand over to our CEO, Matt Akin to take us through the financials and the P&L commencing with Page 5.

Thank you, Geoff, and good morning, everyone. So revenue, as you can see here, revenue has increased 31.4% to almost $503 million, up from $392 million PCP. The Ovato business that we acquired in the middle of September last year has contributed $61 million of revenue through that 3.5 month period and the Active Display group and AFI branding acquisitions that we completed in November 2021 has contributed a further $21 million, $25 million of additional incremental revenue over PCP. Good organic revenue growth for the half, and that was around 9% and reflects a further incremental uplift in activity post-COVID-19 with strong new business momentum fantastic high levels of client retention and ongoing cross-selling across the group's very broad product and service offering. Revenue growth was broad-based, particularly strong. Growth was achieved through our brand activations business, which you may formally have known as retail the slave and our logistics and third-party logistics component to fill the business as well. Revenue associated with travel and tourism and event-related merchandise sales improved further during the period, but still remains below those levels that we saw pre-COVID. Turning to Page 6, talking about margin or looking at margin material profit margin was 44.2%, and this is down from 47.5% PCP. And that was primarily due to the business mix through the half, including the onboarding of the Ovato revenue at a lower margin and a higher proportion of outsourced revenue, particularly in our brand activations business. So although the Ovato revenue generates a lower margin than the broader group, incremental Ovato revenue is expected to generate an uplift in EBITDA margin once operating synergies are captured post completion of integration. Increased input costs, including paper, freight and consumables also contributed to the pressure on margin. However, these increases are passed on to clients over time. And although margin decreased relative to PCP on an underlying basis and excluding Ovato, EBITDA and NPAT margin were broadly in line with PCP. Then looking at EBITDA, this has increased 17.7% to $65 million from $55.2 million PCP. Excluding a $4.4 million contribution from Ovato, underlying EBITDA growth was 9.8%, driven by the uplift in revenue. Net finance costs of $5.7 million compared to $3.9 million PCP or $3.3 million compared to $2.2 million PCP on a pre-AASB 16 basis. Increased net interest expense reflects the higher net debt driven by our additional working capital through the period and the higher interest rates that we've experienced. NPAT increased 16.5% to $24.3 million from $20.9 million PCP. And earnings per share for the half was $0.165, representing a 12.8% uplift from $0.16 PCP. There were nonoperating items of $30 million pretax, excluded from our underlying earnings, and these are noted in Appendix A of our presentation today, if you want to refer to them later. I'll now ask Darren, our CFO, to step through the next few slides of the presentation.

Thank you, Matt, and good morning, everybody. We can now just turn to Page 7, starting with the balance sheet. Increase in net debt primarily reflects working capital seasonality, coupled with the impacts of the Ovato acquisition. Net debt increased to $97.5 million at the 31st of December, up from $36.8 million at 30 June. This was mainly driven by an increase in working capital, cash at bank of $56.2 million with undrawn facilities of $25 million. During the half, the group undertook a share placement and retail share purchase plan, issuing a combined total of 8.587 million shares at an issue cost of $2.25 each, which raised $18.6 million net of related transaction costs. The capital raising was undertaken to preserve the balance sheet capacity for IVE to issue previously announced growth initiatives, including further organic growth initiatives, for example, Lasoo e-commerce marketplace, support further opportunistic bolt-on and strategic acquisitions in the Jason packaging sector, strengthen and deepen is institutional shareholder base, increasing liquidity in the market for IGL shares. Proceeds from share issue and a $10 million drawdown of the group's loan facilities were more than offset by $15.6 million of Ovato purchase price, including related transaction costs, associated restructuring costs are targeted to increase in inventory and must-to launch costs. Capital expenditure, our operational asset base remains in excellent condition. Total capital expenditure for group-wide investment and maintenance CapEx was $12 million in H1. This included outlays associated with the completion of Victorian Braeside site consolidation, bid-out of the newest Bettontew South Wales Logistics site and the digital fleet upgrade and expansion. There are currently no major capital expenditure programs anticipated across the remainder of the financial year, with full year FY '23 capital expenditure is expected to be around $15 million, which excludes the Ovato. On the -- if you now move to Page 8, cash flow and interim dividend. Operating cash conversion of 57% to EBITDA on an underlying basis was lower than 78% in PCP. This was primarily due to the increase in working capital, again, reflecting in higher activity levels and a targeted increase in inventory penalty to ensure continuity of supply across the expanded post about our customer base and to capture further growth opportunities. Aside from the targeted inventory increase, continued disciplined management of working capital, including reduced at days and increased debt collections over the period. Reflecting the strong uplift in earnings per share, the Board declared a fully franked interim dividend of $0.095 per share, up 11.8% from the $0.085 per share of PCP. The group's dividend policy remains unchanged having a full year payout ratio of 65% to 35% of underlying NPAT. We will now move through to the business update section of the presentation, turning to Page 10. Ovato acquisition reconfirming the integration, timing and cost, revenue and earnings remain on track as previously forecast. I've completed the Ovato transaction on the 30th of September 22, the integration timetable and expected financial metrics are unchanged from those previously announced. The integration of an estimated $160 million of Ovato revenue into -- is manufacturing footprint remains on track for completion by June '24 and is expected to increase the group's underlying annual EBITDA by $20 million and NPAT by $15 million. The integration and associated capital expenditure costs are expected to be around $22 million, excluding redundancies. Included on Page 10 is a summary acquisition table. A more detailed breakdown is including Note 13 acquisitions in the financial statements, in summary, for consideration of $13 million, fair value of net assets acquired are $10.3 million, resulting in goodwill and acquisition of $2.7 million. I will now hand you back to Matt to take you through the balance of the business update section.

Thanks, Darren. So just turning to Page 11 and continuing on the Ovato integration piece and updates. So during the half, all major Ovato customers have successfully transitioned across to IVE with no significant client loss during that period. And as we've already discussed, we've had to increase inventories throughout that period to ensure continuity of supply as well. Staff have transitioned seamlessly with many of their staff now stepping into broader leadership roles as we look to complete the integration over the coming 12 months. So we've been really pleased with the people that have joined our business from Ovato got some trend as people. The expanded business is performing well, meeting all customer expectations and all core business functions within the broader business have been integrated under one leadership structure, including sales, finance, estimating and inventory management. Ovato's estimated first half contributions to the group were $60.7 million of revenue, as I [indiscernible] to earlier, $4.4 million of EBITDA and $1.6 million of NPAT for the 3.5 months that they were part of our business during H1. Around $11 million of revenue was transitioned into existing I sites during that half, paving the way to close down and relocate key production assets from Ovato sites into IVE site. And notwithstanding equipment and revenue movements, the sites are working closely to ensure optimal efficiency is maintained daily across all production assets, and the business will progressively realign its operational cost base with revenue and asset transfers to IVE site as we continue to work through the integration. We note at the bottom of the page here, a range of key milestones, and I'd look to assure you that we are right on track for where we indicate we are here and getting into March '23, we will have exited the Brisbane and Clayton sites accordingly within the time frame that we stated with all key asset transfers done, and we continue to move at pace through the balance of the key integration milestones and are very confident that we will deliver per the plan we've outlined here and communicated to investors in the past with full integration complete in 2024 and full acquisition metrics delivered from FY '25 onwards. Turning the page to Page 12, just talking about last Lasoo. So in October, we launched -- or relaunched Lasoo, Australia's leading e-commerce marketplace dedicated to retailer specials. Independent feedback on the user experience and the Net Promoter Score is encouraging and reflected in the unique user visits significantly above levels we've experienced before on the old platform. The pipeline for new retailer integration remains strong with a number of significant retailers having deferred integration from the key Christmas trading period to the first half of calendar 2023. And you can see that in the graphic on this page, Page 12, the bar charts. In addition to the platform in gene alone have been Carlton United Breweries and Linkraft. Lasoo contributed an FY '23 H1 loss of $2.4 million pretax, reflecting costs associated with the consumer go-to-market campaigns, the marketing and the build-out of the Las team. Due to a likely increase in FY '23 H2 marketing spend following promising early platform activity, Lasoo is now expected to contribute a FY '23 after-tax loss of $3.9 million. Over the remainder of FY '23, the management team will focus will remain on bedding down the platform, including completing scheduled retail integrations, successfully rolling out the FY '23 H2 conversion optimization road map and continuing to convert a strong new business pipeline of retailers who want to join the platform. And you can see from the tiles on Page 13, the categories of products that are sold on Lasoo and which of those are our 10 most popular categories as well. So it gives you a feel for the broadness of the product available. And as we turn the page to Page 14, you get a very good feel for the type of brands that are available on Lasoo and that customers are going to shop for deals and specials every day of the week. Turn to Page 15. Touch on electricity, energy and gas in our business. So IVE is a significant user of energy across its operations with gas only used in one part of our business being the web offset printing operations for the group. The group continues to have an acute focus on energy, both from a market volatility and cost perspective and more recently with an ESG lens as we develop our targets in line with internal and external stakeholder expectations for the business to transition to 100% renewable energy in the future. We're pleased to announce today that IVE recently executed a heads of agreement with Iberdrola, one of the largest renewable energy companies globally, and we expect to finalize that contract with Iberdrola in the coming 4 to 5 weeks. The 7-year partnership with Iberdrola will commence on 1 January 2024. And from this state, IVE's electricity will be generated from a renewable source, primarily wind. The review and negotiation of the group's new car purchasing agreement or PPA comes at a time of well publicized and unprecedented increases in the cost of both electricity and gas. And our 2022 calendar year pretax energy costs, excluding in energy associated with Ovato revenues was approximately $9.4 million. Given the 31 December 2022 expiry of our existing energy supply agreements and the volatile spot markets, our FY '23 guidance released at the conjunction of our FY '22 full year results, allowed for a $1.25 million increase in the cost of electricity in H2 FY '23, giving rise to an FY '23 budgeted energy costs of around $10 million. In light of continued increases in the cost of electricity and especially gas, the regional FY '23 at allowance was insufficient. Accordingly, IVE upgraded FY '23 guidance, which Geoff will step you through in a moment now includes an additional $3.3 million allowance for increased FY '23 H2 energy costs, and we've given you a split there between gas and electricity, giving rise to an unexpected FY '23 total energy cost of $13.4 million. From 1 January 2024, the group's new long-term partnership with Iberdrola will provide stable and consistent electricity consumption pricing for IVE. The total price of electricity under the contract will partly be dependent upon the price for LGCs or large-scale generation credits if and when they sell. Importantly, pricing under the Iberdrola contract, assuming available LGCs are sold at today's market traded price would see the group's rates for electricity return to around calendar 2022 levels. And while there can be no assurances around the timing of venture gas price relief, there's a providing expectation the gas market will improve in the near term. And if so, depending upon timing, this may deliver further upside relative to -- it's upgraded FY '23 guidance that Geoff will talk about in a moment. So with that, I'd like to say thank you to all of our staff and customers and partners for their contribution towards what has been a very strong H1 result, and I'll hand back to Geoff to walk through the outlook and guidance ahead of us taking any questions.

Thanks, Matt. And just further to the slide we just went through on Page 15 on energy. We just felt it was really important to provide as much visibility and clarity around electricity and gas, given the focus on it by investors and within the business, which is why we essentially spent so much time on it in the investor presentation given the importance and its impact on future years, certainly since 2024 on when the new agreement kicks in. So to finish off with the outlook and guidance on Page 17. So suffice to say a strong interim result, continued momentum across the business and the emerging synergies from the Ovato acquisition put us in a strong position to deliver a healthy full year as result. Hopefully, as you can see from the waterfall chart on the right and also the comments on power all they've attempted by a temporary but significant increase in energy costs. So we felt it was important in providing this outlook and upgraded guidance to firstly show the uplift in base earnings over our previous guidance that we provided at the AGM in November, excluding any contribution from Ovato revenues. We wanted to clearly demonstrate or illustrate the contribution to NPAT and EBITDA of the Ovato revenues, which is what we've done. And we wanted to clearly illustrate the impact in H2 of the energy costs that Matt just outlined earlier. So the combination of those 3 things are well illustrated on the right-hand side of that page and also we provided the starting point for FY '22 full year in the context of the revised guidance for FY '23. So the net result of that is a revised full year underlying NPAT guidance of $41 million. CapEx, as Matt said, expected to be $15 million, excluding Ovato, and restructure and acquisition costs predominantly related to Ovato, of around $19 million. Darren touched on the interim dividend of $0.095 being 11.8% up on PCP. And once again, like we said previously, wanted to restate our dividend policy, which is the payout ratio of 65% to 75% of underlying NPAT. So that brings us to the end of the formal part of the presentation other than to thank Matt and Darren and as Matt did the entire 2,000 staff or once again, a huge effort over the last 6 months to deliver what the business has delivered both at an operational level and the financial performance. So we'll now open the meeting up, Tim, to any questions that anyone may have.

[Operator Instructions] We've got a question here from Jonathon Higgins.

Congratulations on the result. Obviously, a lot of things coming together with the acquisition of Ovato in the half and a lot of work being done. So congratulations to the whole team. I've got a couple if I might run through them. I think firstly, just around can you just give us a bit of an idea? Revenues have been coming back sort of very strongly and sort of ahead of expectations, you're not far off sort of that $1 billion revenue mark, actually. So congratulations on that. Can you talk about your customer appetite for products and services, Geoff and Matt, and just sort of what power you have sort of competitively at the moment?

Yes. I mean the customer momentum, Jon, has been really strong run through H1, particularly in and around the retail clients, particularly if we drill further through that into the retail experience in stores. So we've seen fantastic activities right in and around the in-store experience campaign kitting Belmont logistics businesses have been extremely busy. The amount of product that they've been onboarding and delivering out on behalf of clients. So it's not showing any change in momentum at the moment, Jon.

And the other point -- It's Geoff here. The other point we made to the competitive landscape point is we clearly have talked at length about the competitive landscape changing quite dramatically in the web offset space. But equally, in the other parts of the business sector in which we operate across the diversity of what we do, we -- we have far less number of competitors now than what we did 10 years ago, and we hold a very strong market positions in each of those respective parts of the market that we operate in. And then when you combine that with the integration or the level of integration of our offering in terms of the number of clients engaged with multiple parts of our business, it puts us in a very strong competitive position.

I'll just ask 2 more, if that's okay. So just secondly, just on Lasoo, like that's been relaunched. That looks good. Obviously, it's loss-making at the moment, just with the promotional activity and the like that you're doing. Can you sort of talk towards what you sort of expect out of Lasoo and some of the investment you do think you'll have to make in that business or want to make over the next couple of years?

Yes. Look, from a CapEx perspective, we -- other than tweaking or refinements to the platform. There's no intention and no need from what we can see to invest any more money at this point because what we have and what we've invested in is completely scalable at this point. I think the question for the businesses as we're tracking the early momentum of Lasoo is to the extent to which we deploy our marketing dollars because we may, in fact, make a decision to drive the marketing spend harder if we feel we're going to get back to our buck and the timing is right. So it's still fairly early on because we only launched it in October -- so -- and then we've had Christmas, New Year's mixed in there as well. So there's a lot of moving parts. But I think early indications are encouraging. We continue to monitor it closely. And if that means throwing some more dollars from an investment perspective to amplify the brand in the market, then that's something that we would certainly consider it was worth doing.

Jon, we've got a very clearly defined road map for that platform as we look out over the next 12 months and all of the development requirements for that platform can be dealt with by the existing team that we already have in the business today. So -- to Geoff's point, it will be literally about marketing dollars if we continue to double down and deep role because of how well it's going. Thanking everybody on this call, please go on to last this afternoon and buy something to check out the user experience and help the daily numbers.

We'll do that, Geoff, as soon as we go and grab the Coles magazine first. So just last one for me, then I'll join the queue again. Just on the gas and electricity point, I appreciate the disclosure on that for the full year and for the half. You sort of referenced that you potentially could see some upside risk to guidance on that number. Are you just referencing what you're currently sort of seeing in spot markets at the moment?

I think the main piece of that component that's still quite fluid for us, Jon, is in and around gas -- so the reluctance of retailers to contract in on gas at the moment, the impact of the government putting that $12 wholesale price cap actually seems to cause more chaos in the market. The regulator has not stepped in yet, but we would expect the regulator to Stephen soon if we don't see retailers back in the channel, providing certainty and contract terms to customers because it's not sustainable long term for Australian manufacturing to be riding the default rates that are in the market today.

Next question from Chris Savage from Bell Potter.

Great. Geoff, Matt, Darren, and I'm guessing Tony as well. Just around the elevated working capital level, can you give us an idea how long you expect that to be maintained? Or should we think -- should we be thinking about that just as the new norm now going forward?

Yes. Look, yes, thanks, Chris. At the moment, I wouldn't say it's the new norm moving forward, but it is early days post their acquisition of Ovato. So we've had to -- as I've outlined in the acquisition table, the amount of inventory that we acquired about was relatively low given the size of the business. So we've had to elevate our inventory on to make sure that we support and service acquired inventory needs as we do. So at the moment, in the short to medium term, we would expect an elevated working capital level. Longer term, we would hope to be able to bring that working capital level down once we get a better understanding of inventory open inventory holdings for the new client base.

I think the other thing, Chris, you'd be aware that last year, we started 2 ships ourselves and brought in $20 million to $25 million per ship load of paper to ensure continuity of Ovato clients. If I look through calendar '23, I think the supply chains are starting to return to a reliability and normality where maybe we don't need to take those sorts of extreme measures moving forward, and that will allow us to better manage our working capital position as well. So we've got more confidence in the reliability of the supply chain.

It's interesting you said that, Matt, because I was just going to raise as a follow-on that news of the Miraval mill closing. So I thought that might be a reason that would cause you to maintain this sort of level of working capital inventory going forward? Is that the case?

We didn't take too much out of that mill. So a little bit, but it wasn't a major supplier to IVE. So it doesn't have too much impact on us.

We still should be vigilant on our supply chain. It's only 5 minutes ago really that we had a supply chain crisis that we managed incredibly well as Matt just referred to and for investors that haven't heard us say before, paper is as good as cash. we can hold paper for 2 or 3 years, if we want them, we can still use it. It's not our intention. But we're in a really solid position at the moment. And as Darren said, it will step down and will step it down at the right time, but we don't want to compromise the capacity of the business to deliver in doing that. So we're in a solid position, and we're monitoring it really closely.

Sure, thanks Geoff. And just a second question, forgive me for being the analyst. I know that inks only just try on Ovato, but you've well and truly flagged that M&A is still on the agenda, particularly in the paper -- sorry, in the packaging sort of area. What sort of timing should we be looking or expecting something this financial year? Or should we only be thinking out that next financial year?

Yes, that's somewhat of a question, I suppose. I think -- we haven't [indiscernible]. Look, we haven't referred to it. Yes. No, look, we haven't specifically talked about packaging or necessarily growth initiatives in the deck that we've just been through. But certainly, we are mobilized and we think in the next 6 to 12 months, we'd be out the gate on hopefully a beachhead acquisition in the packaging space that we've talked about before. But we've certainly been distracted over the last 6 months with Ovato capital raise and other priorities for the business. But we are mobilized on it now.

Next up, we've got a question from Shane Bannan from Bligh Partners.

Coming off the market and retailers particularly and even some of the marketing group is just what I'm caution going into the next 6 to 12 months. Matt I heard what said earlier about things been robust, and there's no real sign of any sort of canary on the part of the client base. But I'm just wondering, I know the noise are you getting off of line plus with respect to looking at a file while -- and what we see in terms of the way in demand and that sort of thing and how that's like you translate that to your business...

When I look across a number of the sectors that we have customers in, Shane, I think about travel tourism exhibition event. We've seen also rebalance on that over the last sort of 2 to 3 months. So I think some of those sectors are performing very, very well. We're not seeing retailers as they think about their next financial year plans, talking about pulling back on activity at the moment. I think part of that is driven by the fact that we are seeing a lot of consumers flock back to stores. It's also partly driven by the fact that some retailers are carrying more inventory than what they'd probably like to. So they know they've got to keep the foot down on that marketing spend to push that at the moment. And then obviously, there's a lot of retailers like supermarkets and so forth that they're enjoying good momentum and good results and continue to invest accordingly in that in terms of the way they engage their consumers. So there's no indicators at the moment, Shane, out of any of the clients about any apprehension or slow up as they look out over the coming few months.

Great. And can I ask an explanation in your commentary about the energy impact going into the next sort of 6, 12 months and ahead of your adopting the renewable platform. The suggestion implicitly is that you're not going to be claiming it back off the market [indiscernible] client from some of the commentary earlier that you were trying to mitigate the margin pressure you faced over the last 6 months going forward on atoning how that translates.

Well, I suppose. it's Geoff [indiscernible]. We are committed to trying to deliver a consistent margin at the bottom line. So we've got a lot of moving parts in terms of the costs in our business, some are more predictable than our rent. But whether it be labor or energy costs or material cuts at the end of the day, in the washup, we're trying to deliver an EBITDA and NPAT margin that is sustainable and that we're comfortable with. So Part of that includes clearly increasing pricing to maintain a material gross margin along the way. And obviously, with labor gross margins, I think -- I don't think it's necessarily about answering the question to say we had to recover single dollar. It's a complex answer to what would appear to be a simple question.

We get that your vision and market is going enough to be able to put through price rises without in a pushback from the purpose?

Yes, we've had to put prices up because we have had certainly material increases in some costs over the last 12 months. We'd like to think with improvement in shipping, for example, coming out of Europe and the -- and from what we just talked about in relation to energy that we might see some of these costs that we've incurred, the increases in costs were documented over the last both then come on.

[ Stuart Turner from Glasson Equities. ] Do you have a question here or send it in the chat, would you like to ask a question?

[indiscernible] of the energy market. And obviously, this is a critical issue for you guys. And I noticed that the dispatch prices have come down rapidly in New South Wales and even more so in Victoria lately compared to their previous peaks. So what sort of flow through, are you able to discuss with your suppliers? And also, the LGC market, I don't fully understand it. And look, I'm not suggesting that you can ask a detailed question on it. But given that's a key component of the price, what's your experience as a user? Like what are they telling you? Is it the case that there's only, say, 10% of power generated green. So only those guys can issue certificates and therefore, the demand is going to exceed the supply and the price is going up? Or how do you sort of see this in terms of -- from a risk point of view to your business going forward?

Look, you come in at any point, Matt?

I think in terms of the numbers in this calendar year '23, which you've tried to illustrate filling with gas first, we feel we're in a high tidemark when it comes to gas. We do and that could change in 2 weeks. It could change in 3 months. But clearly, there's a lot of political pressure on this whole gas situation because it is a crisis for households and it's a crisis for a number of business gas is pretty fluid. It will sort itself out through the course of the near future is the term that we use. When it comes to electricity, we're basically locked into a position for calendar '23 on electricity. So we have outside of our consumption of electricity, which is not really the issue. We're locked in on our rates for calendar '23. So we've got a clear lot of visibility on that. And then to the third part or first part of your question, whatever it was in relation to the new contract with Iberdrola. Yes, there's a consumption base price in there. And then there is a price that's notionally allocated to the value of these LGCs as you refer them to. And to be quite honest, and we've done a lot of work on this. We could sit here for an hour and talk about the LGC market and the LGC scheme. And the suggestion that it makes fire in 2030 or the government replacing the LGC with an alternate scheme. It seems like from our perspective, and you think about it intuitively, in 2023 now and 2030 is not very far away, and this country has to transition by 2030 to a renewable footprint. You get the sense that these LGCs and the value of LGCs, the value of those and the demand for those as companies are running behind the April in making the transition to renewables, that will underpin the value of the LGCs if I've tried to explain that in the simplest way, something that is quite a sophisticated, complicated market. But I think a lot of companies are trying to get their head around. And then you overlay that with your BSG that many companies are on the runway with, I think we're early movers. I think we've got out of the gate. We wanted certainty. We've kind with one of the largest global players, which is important. We're a good counterparty for them in terms of the profile of our business and the spend. So I think, yes, I think gas come off electricity were locked in for calendar '23, and I think we've got a pretty clear line of sight from calendar '24 on, alter the LGC market will remain fluid. And the forward market for obviously will remain fluid over the coming years. Yes. I mean, sure, the beauty of the Iberdrola there is that certainty for the business on LGC or rates are going to pay over the next 3 months, not with -- sorry, out to 2030 over the next 7 years, notwithstanding the LGC situation. And then the optionality for the business to decide at what point over the coming 7 years, do we want to transition to fully renewable energy and relinquish those LGCs accordingly on that basis. And we led to a stepped-up process out to 2030 or whether that's a big bang at a particular point in time. That's the optionality that this PPA gives the business to decide on that ESG front as we move down that journey further. The project Iberdrola I've got 7 wind farms in Australia already sort of got a proven track record in the market of delivering renewables and the project that we've committed into is the Flyers Creek wind farm out in orange in Western New South Wales here.

Is there any further questions from the analysts online? Otherwise, I'll pass it back to Geoff for the written question in the Q&A box.

Yes. There is one written question, which regards all the learning parts of Ovato energy costs and so I think -- and restructuring costs, I feel in what we've been through in the outline of the guidance, we've done our best to unpack the moving parts as best we could. The question in relation to seasonality. We're always more heavily weighted to H1 from a revenue perspective than we are to H2. And that once again has changed over the last years as we become more heavily weighted in the business to retail. So it's probably 55.5. But we're also -- that's dovetailing in with the emergence of synergies. The complexity is shutting down in the major site in Ovato and [indiscernible] like that equipment. So this year has a lot -- it just has a lot of moving parts. So we try to unpack them as best we can, but that's roughly the weighting between H1 and H2 we are referring. That's the...

Thank you, everyone. That's probably time now to finish the Q&A. Thank you for being online. If you have any further questions, please reach out to the team, and they will be happy to help. Copies of this webinar will be available from the IVE Group and Finance News Network website over the next few days. Thank you all once again, and have a nice day.

Thank you, everyone. Good morning.

Thank you.