Keller Group plc (KLR) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to this virtual presentation of the interim results for the Keller Group. For those of you who do not know me, I am Michael Speakman, I'm the Chief Executive Officer of Keller Group plc, and my co-presenter today is David Burke, our CFO. I think that you'll be pleased with the progress we've made in the first half of 2021. As you'll see in a moment, the results are better than expected and set us up well for the second half and indeed beyond. Today, we will follow our normal agenda. I will introduce the results by way of a summary. David will then take you through the detailed financials. And then I will follow up with an update on the business, some interesting progress on ESG and a strategy update. We'll then conclude with a summary and outlook before we move on to questions and answers. And so to the summary. Despite the anticipated impact of the pandemic and the stiff foreign exchange headwinds, we've had a strong performance in the first half and finished the period ahead of expectation. Aside from the adverse FX impact, volume is more or less flat overall. Q1 started slow with a bit of a hangover from the last year, and momentum has gradually increased as we progressed through the second quarter. Looking at profit, it, too, was adversely impacted by FX and suffered 3 further negative impacts. Those being, the anticipated margin impact of the pandemic, higher steel prices at Suncoast and the suspension of certain contracts in Africa, a region that's recently transferred into the Asia Pacific, Middle East and Africa division. One positive profit impact was the favorable settlement of a historical claim in North America. David will give you more details on all these material movements when he details the profit bridge in a moment. Cash performance remained strong with leverage well below 1. And we continue to make good progress on conventional and COVID-related safety, ESG and the continued implementation of our strategy. More on each of those a little bit later. The Board has approved the interim dividend in line with last year, continuing our 27-year history of paying dividends. We believe we have now passed the anticipated inflection point of the pandemic, as I will evidence to you in a little while. And this, together with our record order book, gives me confidence as we look forward into the second half. Indeed, we now anticipate the full year performance will be materially ahead of the Board's previous expectation, with a modest second half bias that arguably gives you a lower risk profile than in previous years. I will now hand you over to David, who will take you through the details of the financial results.

Thanks, Mike, and good morning to you all. I will now run through the more detailed financial results for the half year. We'll follow the format pretty similar to prior presentations. I will first provide some comment on the income statement for the half year, looking at both underlying results and nonunderlying items. I will also provide a waterfall analysis that identifies the key bridging items between underlying operating profit for the half year 2020 to the half year 2021. I will then talk through the cash flow, some balance sheet highlights, including net debt, and then highlight some look-ahead modeling considerations for the remainder of '21. Let me start with the income statement. This slide shows the summary income statement for the half year '21, shaded columns to the left, and half year 2020, the unshaded columns to the right. This is the format that was included in the announcement issued earlier this morning. The 3-column income statement format shows underlying results, nonunderlying items and the third column being the sum, the statutory results. Whilst our underlying profit is down from 2020 to '21, the reduced value of underlying items has resulted in an increase of statutory profit from GBP 10.2 million to GBP 20.3 million. Just looking at revenue first. As Mike mentioned, there was a considerable FX headwind with a stronger sterling. Overall, on a constant currency basis, the group was broadly flat, as was the North American division, with the reduction in Europe offset by growth in AMEA. The reduction in Europe was driven by lower volumes. The AMEA increase was driven by the Cape Lambert project in the Austral business and the Indian business. The early part of the year was impacted by harsh weather and COVID delays, but we have seen momentum build as we have come through the second quarter. Underlying operating profit for the first half decreased by 9% on an organic and constant currency basis, with a positive historical claim settlement being more than offset by productivity issues associated with COVID, the harsh weather, the impact of contract suspensions in Africa and the impact of steel tariffs in the Suncoast post-tension business. The margin drop to 4% from 4.6% wasn't as steep as we expected for H1 given the momentum that built in the second quarter. In the next slide, I will bridge that operating profit performance. Net finance costs have decreased from GBP 7.2 million in 2020 to GBP 4.3 million in '21 driven by lower average borrowing and lower interest rates. Taxation at GBP 9.5 million is at an effective tax rate of 27%. The reduction in the effective rate is driven by the geographical mix and less deferred tax write-offs in '21 compared to 2020. The earnings per share has reduced by 10% to 35.6p driven by the reduced underlying profitability. The Board has approved an interim dividend of 12.6p, which is consistent with 2020. We will now move on to the operating profit bridge slide. This seeks to bring to life the movement from half year 2020 to half year '21. This should be a format you are familiar with from previous presentations. Moving from left to right, starting with last year's profit of GBP 47.9 million, we highlight the FX impact, which was considerable at GBP 4.7 million given the stronger sterling. Moving on to the North America division. The first block of COVID margin is common to all divisions and reflects the sluggishness of the first quarter, be it COVID impact or productivity issues associated with the harsh weather, keeping in mind that quarter 1 2020 was relatively unaffected by harsh weather. Next is the impact of the settlement of a historical claim on a 2017 project which settled in April this year. The next block relates to the Suncoast business, where lower volumes and increased steel costs impacted the high-rise and rebar product lines. The slab on ground product sector was impacted by steel cost, but demand and the ability to reprice in the single-family home sector in the relative short term pretty much mitigated that impact. The Canada business that was restructured in 2020 continues to grow profitably, building on the expansion into Quebec in the latter part of 2020. The Moretrench industrial business is having a fantastic year with volume and profitability outstripping 2020. Now turning to the Europe division. Again, the COVID struck margin impact with a slow first quarter and a deep mid-winter across the division. Moving along the next block is the impact of exited noncore businesses with [ Ivanovich ] in Germany and Brazil having an impact. The final block for Europe relates to the U.K. business, which has grown due to the HS2 activity and increased activity more broadly across the business unit. Finally, the AMEA division. Again, a block for COVID struck margin as activity was impacted by a slow first quarter with the stop-start response to COVID outbreaks across the division along with the weather impact of heavy rains on the Eastern Seaboard of Australia and cyclones on the Australian West Coast. The next block highlights issues in Africa in respect with contracts that have been suspended, predominantly related to the LNG contract in Mozambique, which was stopped because of terrorist activity in the area. The last block refers to the Austral volume, predominantly benefiting from the Cape Lambert contract. Moving to the next slide, I will cover off nonunderlying items. Again, you see the same income statement, but this time focusing on the middle column, nonunderlying items. Non-underlying operating costs during the year were GBP 6.3 million with GBP 3.5 million covering the creation of the Southwest Europe business unit following the merger of French-speaking countries and Iberia, LatAm and some rationalization costs at our manufacturing business at KGS. We disposed of the Cyntech anchors business just after the period end, so full provision for the loss on sale was taken in the first half. The settlement of the historical claim in North America was linked to the Bencor acquisition, resulting in a further GBP 1.3 million of contingent consideration being paid out. The GBP 0.4 million charge for amortization of acquired intangibles related to the Moretrench industrial acquisition. Other operating income of GBP 0.7 million is in respect of a contingent consideration received on the sale of the Wannenwetsch business following the filing of their 2020 accounts. The cash impact of the GBP 6 million charge is approximately GBP 3 million. The sum of all items across the underlying and non-underlying performance gives a post-tax statutory profit of GBP 20.3 million for the half year. I will now move on to the cash flow. This page shows the summary cash flow from operating profit down to net debt. The business is in a very contrasting position this year with every attempt being made last year in Q2 to preserve cash as the business contracted due to the COVID crisis. Whereas this year, with the increased business momentum from the second quarter, there is a start of a return to normality. Looking at the box that breaks out the working capital, you can see the difference between activity levels in 2020, with decreases across all lines contrasting with increases across all lines in '21, reflecting the ramp-up of activity that is now taking place. In the bottom box on the right, we highlight the net debt on a lender-covenant basis of GBP 113.4 million, maintaining the 0.7x leverage from the year-end. More on net debt later. The other call-out in the statement are our CapEx and depreciation realignment in '21 following a pullback on CapEx in the first half of 2020. Provision movements mostly related to pension schemes, the lower finance cost due to lower average borrowing and interest rates and tax cash payments returning to normality after the benefit of deferrals in H1 2020. The final dividend in respect of 2019 was paid in H2 2020 in contrast to this year when it was paid in H1 as normal. We shall now move on to look at the summary balance sheet. This slide shows the summary balance sheet at June '21 compared with amounts at June '20. The movement on intangibles and tangible assets is set out in the tables. Nothing significant to call out other than the alignment of depreciation and CapEx for both fixed assets and the right-of-use assets separately shown in the box. The increase in the debtors and payables line again highlight the increased activity levels in the business. The next slide provides some more detail on the net debt profile for the first 6 months of '21. Looking at the graph, you can see the steady nature of the cash performance throughout the 2020 year has continued into '21. However, with activity levels building, we do expect more pressure to come to bear on working capital in the second half of the year. This pressure will increase should RECON win the specific contracts identified as part of the earn-out. More on that later from Mike. We have operated well within our covenants throughout the year with leverage at 0.7x at the half year end against the limit of 3x and interest cover at 30.5x against a minimum of 4x. At period end, we have GBP 302.3 million undrawn borrowing facilities with GBP 266.5 million committed. The GBP 300 million COVID corporate financing facility duly lapsed in March this year. Our facilities comprise of GBP 375 million multicurrency RCF expiring in 2025 and the USD 125 million private placement with $75 million expiring in 2024 and $50 million expiring in October '21. The next slide shows some look-ahead modeling considerations. This slide is intended to provide some insight into the drivers of financial performance into H2 '21. Suncoast steel tariff, similar to H1 with active management of steel price movements. Large projects, HS2 and Cape Lambert continue to have an impact in H2. Portfolio action, the RECON acquisition, we expect minimal impact on the P&L in '21. Operating profit down on 2020 but better than our previous set of expectations. Operating profit phasing, modest H2 bias, given the historical claim settlement in H1. Interest, lower rates and lower debt to continue into H2. Tax rate, we do expect the effective rate to be around the 27% plus or minus 1% for the full year. On Biden tax implication, a real unknown. Should the rate increase, then there will be at least a deferred tax impact in '21. FX rates, macro-dependent, but strong pound-U.S. dollar rate will impact earnings. On cash/debt, increasing working capital requirement as the business ramps up and if RECON wins the specific contracts identified as part of the earn-out. However, by year-end, we should still aim to be in the bottom half of the 0.5x to 1.5x range. That's it for me. Thank you for your attention, and I will now pass you back to Mike, who will take you through the business performance update.

Thank you, David. I'll now take you through some of the details of the business performance in the period. As normal, the first division that I'll talk to is the largest, that being North America. Year-on-year, COVID margin compression clearly made a significant impact, as did the increase in steel prices at Suncoast. Whereas most of the Keller business can pass on material cost inflation pretty quickly, the high-rise segment of Suncoast is on a much longer order cycle, and hence there is a delay before cost increases can be fully recovered. On the plus side, a positive resolution of a historical claim, volume growth of Moretrench Industrial and performance improvements in Canada all boosted the profit half-on-half. The North American market is almost back to business as usual. It was the last geography to be impacted by COVID and has been the first to recover. Overall, the division is in very good shape as James Hind retires. Many of you will know James from his time as CFO. I'd like to take this opportunity to thank him for all he's done for the company over his long tenure with the group. Eric Drooff, currently the Chief Operating Officer of Keller North America, will succeed James. Eric has over 20 years of service with Keller and has strong leadership capabilities and has geotechnical skills, making the ideal successor and the best person to lead Keller North America going forward. In relative terms, half-on-half, Europe has been the division most heavily impacted by COVID. In contrast, it's also benefited from increased volumes in the U.K., much of which has come from HS2. There have been a lot of profit puts and takes across the division as the logistical effects and the business confidence impact of the pandemic gradually worked away across the continent. In the first half, restructuring of the divisional HQ and the merger of Iberia with the French-speaking business units has been completed, and both will lead to more effective organization in the future. Demand momentum across the division is increasing. And in the short term, local supply chain and labor supply issues will continue to be a challenge. And finally, Asia Pacific, Middle East and Africa, which I'd remind you is formed of our old APAC division and the Middle East, Africa business unit that was transferred from Europe. The first thing to draw to your attention is the breakeven performance in H1. But don't be alarmed, this isn't a replay of historical issues of APAC. No, the major half-on-half issue is in the Middle East and Africa business unit, and more specifically Africa, where we've taken pretty prudent accounting position in respect of 2 suspended projects. In respect to both, commercial discussions are ongoing with the respective clients to resolve the matters in dispute. The more material of the projects is an LNG project in Mozambique and the discussions in this respect are constructive and are at advanced stage. In relative terms, the division continues to be the one most heavily impacted by the pandemic. Indeed, last week, Keller Australia had 6 of its largest projects subject to a full lockdown. That said, tendering activity is increasing, and you get the distinct feeling of when, rather than if, about the recovery across the region. The order book has progressed well in the first half. It has grown to a record level of GBP 1.2 billion. North America has grown slightly. Europe, with the benefit of HS2, has grown a lot. Whereas AMEA has reduced as the Cape Lambert project has unwound from the order book. As a general comment, we haven't seen many cancellations through the period, and clients are beginning to follow their normal tempo in terms of the order revenue cycle, and tendering pretty much everywhere is reasonably buoyant. Whilst the order book chart is noteworthy because the record level of the order book, this next chart is even more important. I've been waiting to share this chart with you since March last year, and it clearly evidences why I believe that we've now passed the anticipated COVID-19 positive inflection point. It shows the level of weekly orders and revenue for across the whole group on an LTM basis. And there are some key features I should bring out. The first is the period where COVID progressively impacted the group. The second is the almost immediate reduction in revenue as a consequence of restricted access to sites. And then there's a delay and a reduction in the order intake across the business as business confidence receded. And then finally, the 2 inflection points -- 2 positive inflection points. First, orders in Q1 followed by revenue in Q2. These 2 charts support why we have increasing confidence as we move forward. Moving on to the important topic of ESG. And at this point, I'd like to remind you of our purpose: building the foundations for a sustainable future. You can see sustainability is very deliberately at the core of our purpose. This slide converts the externally recognized terms of ES&G into more specific terms of planet, people and principles that are more readily recognized and digested by the Keller team. The slide also highlights we have adopted 4 SDGs to be implemented across the whole group and 7 that we've got local sponsorship and application for. The 4 global SDGs include safety and governance, 2 that we've had a lot of history and experience with and 2 new ones in the form of gender, DE&I and carbon reduction. Starting with the established SDG of safety. First of all, I must update you on the fatality we had earlier in the year in Salzburg, where we lost a long-serving and widely respected employee. The numerous investigations into the accident are now all complete. And whilst Keller has been determined to be not at fault, we have used the incident to advance the impetus of our safety program. In terms of AFR and TRIR, you can see the charts in the continuation of an improving trend. Indeed, we're now increasing our focus on near misses and other proactive measures in order to begin to preempt incidents and avoid accidents. Another aspect of the safety in the period is the management of COVID. Again, I'm pleased with the progress here. Whilst the teams have kept the protocol disciplines and inflection rates are being contained, it's clear from both the direct management interaction and employee focus groups that there is a bit of an emotional debt left as the pandemic begins to recede. And we're working on several employee welfare programs to try and address this issue. We have encouraged and supported all employees to be vaccinated. Indeed, in recognition that most of our employees have been vaccinated by the national government free of charge, we are donating to UNICEF's vaccine appeal a sum equivalent to the cost of vaccinating the entire workforce and their immediate families. Now for a new SDG, carbon reduction. And first, to the time line, where we look very carefully each of the carbon scopes and what is required to make an impact on them. As a result, we've set 3 different targets for neutrality. Like many companies, we're pretty familiar with scope 2 and what we need to influence it quickly. So the target is each of the carbon scopes and what is required to make an impact on them. Like many companies, we're pretty familiar with scope 2 and what we need to influence it quickly. So the target is set at 2030. Scope 1, which is impacted by the life cycle of our rigs, the development and redesign of new carbon-free power sources and other medium-term developments will take a little longer. So scope 1 is set for 2040. And finally, scope 3. Here, we are setting a goal for the elements of it that we can directly influence, and that is essentially scope 3, excluding materials. This will take longer still by virtue of the need to work with customers, suppliers and competitors to change the practices and technology across our industry. So this has been set at 2050. I use this next slide a lot. Indeed, I use it at every opportunity I can with our extended leadership team. The intention is to make it central to each leader's thinking and decision-making. My ambition is to make them albeit to be able to recite it in their sleep. If an action or decision isn't contributing to the realization of the strategy, then they shouldn't be doing it. Actions must be aligned to the strategy if the strategy is to become effective. And in this regard, we're making real progress. And here is the evidence. Our strategy has been live for a little over a year. How are we doing and implementing it? Well, in the last 12 months, we've been focused on the first phase of the strategy, which is all about the portfolio, about being in the right markets and the markets where we can be successful. In terms of actions, we've been busy. Despite the travel restrictions of the pandemic, you can see a shopping list of geographic rationalization, product rationalization and restructuring. Whilst we'll always keep refining the portfolio as we move forward, we have largely completed this phase of the task. The next phase will take much longer than 12 months. I think it will take several years and indeed, by its nature, will probably never be quite complete. Why so? Well, our next phase is about using the group's expertise and scale to be more competitive and gain leadership in our chosen markets. In doing so, we will enjoy better insight into tendering and market activity, better utilization of our assets, better utilization of our crews and better utilization of our yards and fixed overheads. All of these things will lead to better financial performance. By its nature, this is a continuous journey rather than just a binary task. It will involve both organic activities and also some M&A. And we've made good progress, as you'll see in a moment. Here, I picked a great example of global leverage, where the global product teams led by Dennis Boehm. The GPTs have been running for a number of years now and are quietly becoming more and more effective. They're made up of dedicated technical and operational specialists in particular product groups, as shown on the slide. These professional people, as well as doing their local day job, find time to share their knowledge and experience across the whole group. This communication challenge isn't trivial. It's hard, but it's worth it. By sharing their expertise, the teams can derisk projects in situations where a technique is being used for the first time. They can share innovation and productivity improvements. And they can act as experts and contribute to safety reviews. Great example of where Keller's global scale is a clear differentiator. The second example I've selected is the acquisition of RECON. RECON is a great fit with Keller, with many cross-selling revenue synergy opportunities. Indeed, even before we'd completed the deal, the Keller Foundation's team and the RECON team were working on a couple of combined opportunities which they've both identified. RECON has many characteristics in common with our Moretrench Industrial business, and both are focused on the environmental space. The deal itself essentially has 2 elements: one for the base business, which is in the process of recovering from the COVID downturn; and a second that relates to certain specific commercially sensitive contract wins. If individually or collectively these wins become material, we will let you know. This acquisition does clearly mark the return to M&A for the group. And indeed, we've used the process of acquiring RECON as an exampler, a means to regain and test our M&A process. We are looking for other opportunities. And indeed, we've already chosen to withdrawal from several of them. We are in no rush, and we will be selective. In line with our strategy, it will be deeper, not wider, as a theme. So M&A will be focused on our existing footprint, principally in North America and Europe. And now on to the outlook and summary. Summary of the first half. Basically, it's been good. It's been better than expected. Despite the margin compression of COVID, despite the headwinds of foreign exchange, despite the prudent accounting stance we've taken on the 2 suspended contracts, we're ahead of where we expected to be. And more importantly, we've passed the inflection point to the pandemic, and we have a record order book. To use a nautical metaphor, we can feel the wind in our sails. And as a consequence, the expectation for the second half and the full year have both materially increased. It gives us confidence as we move forward with the execution of our strategy and engenders quite optimism for 2022. There are still some rocks to navigate but the sea stake is getting better. At this point, I'll repeat what I said at the preliminary announcement. All of this is because we've got some great people in Keller who are committed, clever and well led by the business unit leaders. And to all of you, I'd like to say thank you. We're in great shape and well placed for the future. And now to questions and answers.

[Operator Instructions] Our first question today is from Joe Brent of Liberum.

Two questions, if I may. Firstly, you've very helpfully given the profit bridge where you talk about the COVID impact in the first half. No one has a crystal ball, but I guess you must have some budgeting assumptions for the second half. Interested in your thoughts on the ongoing impact of COVID. And then secondly, you've talked about price -- steel price rises and the impact that's had. Could you give us an update on where we are now with regards to that? And what the outlook is and the likely impact on your business from steel prices.

Sure. I'm going to take the first one of those, and then I'll let David take the second one. In terms of the impact of COVID, what we've seen up to this point is basically that the impact of COVID has rolled into the -- across the group from east to west, Asia being impacted first and then Europe and then North America. And what we've seen so far this year is the rollback has happened in the opposite way. So North America has come out of it first and now Europe is beginning to throw it off. And lastly, Asia and AMEA. I think what we're realizing now, and we realized during our last refocusing cycle, is that a lot of the resilience is actually -- and predictability is actually a function of vaccination rates. In North America and Europe, you can see people regaining confidence and regaining stability a lot quicker. Whereas AMEA and some of the countries within that region, some of the vaccination rates are fairly high, some of them are fairly low. And you've got nervousness in terms of unlocking between those countries geographically. So from the point of view of where we stand, North America going forward I think will be pretty resilient. Europe, I think, will still have a few logistical issues. And we'll have even more as it goes into AMEA. So we are expecting a few hiccups and unpredictable road bumps in certainly that last division during the second half of this year. And I think places like Australia, in particular, it will take a little while to shake it off. But that's -- who knows? That's kind of the shape of what we see at the moment. David, over to you for Suncoast.

Yes. As I've pointed out in the video there, there are 3 product lines in Suncoast: the slab on ground, the rebar and the high-rise. And I think just to reiterate the slab on ground I think watched its space year-on-year by virtue of volume against the higher steel prices. And I think the areas where we did have an impact year-on-year were in rebar and the high-rise area. I think we expect that to continue into the second half. I know steel prices will -- are predicted to come down in the second half. But actually, I think it will take a little while for that to see its way through. And we don't see anything materially changing in respect of that until early in '22.

And when you say slab on ground watched its space, does that mean the volume increases offset the price increases? Or -- is that what you mean by that?

Yes, sorry. Yes. So yes, there was price increases which did have an impact on margin, actually in volume. It's a very hot market at the moment and continues to be. And because of the increased volume, from a dollar perspective, it didn't have an impact year-on-year.

Our next question comes from Clyde Lewis, Peel Hunt.

I think 3 for me. One, firstly, I suppose around the margins in the order book. You've obviously seen another increase in the forward order book. Can you just maybe comment a little bit around the margins that you've got coming through there and how they vary? The second one was on the slide you put up, Michael, on Page 19, that sort of revenues versus orders. And I suppose the question I've got is around the difference between the two. And if we look back, I suppose, through 2020 and late '19 when orders were comfortably running ahead of revenue, at what point, if at all, do we see revenue running ahead of orders? Because obviously, I would have thought at some point, there's a pile of work out there that hasn't been done. Do you see a jump up in revenue over and above the order outlook? I'm trying to sort of gauge what happened to that order work. Has that gone completely? Or is it just sort of temporarily paused, I suppose? And the third one I had, I suppose, was sort of -- you've obviously flagged the GBP 7 million claim settlement in the U.S. that's come through in the first half. Have you got anything else out there that is due to settle, that you're still negotiating on that could provide a little surprise over the coming 6 to 12 months?

Sure. I'll take the first 2 of those, and then David can take the last one. In terms of margins in the order book, it's been quite interesting there the whole managing of tenders and margins over the last 12 months. And I think we've seen the classic profile that you get in recessions, where, first of all, you see a -- sorry, a volume reduction in the first period, but margins are more or less where they've been historically. In the second period, as a consequence of the volume reduction, pricing gets a bit tighter and you see margin compression, and that's what we've seen coming through. And then in the third period, you see volume picking up, but margin is still pretty low because people's pricing expectations have picking to do. And then in the follow-up period, as you get to a situation where volume is -- supply and demand are matched, pricing starts to come back again. And I think we're somewhere between that third and fourth period, depending on where you are in the world. We have been very disciplined during the period in terms of what orders, what margins we have accepted, and we've been actually quite robust about that. And quite logically so because we're being very careful not to commit to low orders with longer periods because we knew or we anticipated that there should be a faster recovery. So suffice to say in terms of the order book, it will be gradually, and I do say gradually, strengthening as we move forward. And by sort of early part of '22, I expect it to be fully recovered. In terms of Slide 19, as you'd expect, there's kind of a lead lag, a hysteresis effect with this. And I would expect during the course of the remainder of this year and early parts of '22, those 2 lines, the revenue line will pick up and will follow the profile, hopefully, of the order line. My nervousness at the moment is the fact that we're confident that it's turned, it's just how quickly and how steep is that grading coming backwards. And at the moment, it looks pretty healthy. And so we're pretty confident. And of course, you will have an increase in the confidence of people pull orders out of the order book and have the confidence to actually commit to sites that they've already preordered, which I think we are seeing more of a return to normality in that respect. So I expect your comment is right. There will be, over the next probably 18 months or so, a correction where that pent-up demand is slowly reduced. David, over to you in terms of the management of our claims.

Yes. So I think the very nature of the -- they do tend to be a bit one-off in sizable which is why we picked them up. And we don't have anything in the pipeline at the moment of the same scale. So the only thing I would refer to, given what Mike said about the prudent accounting application we've applied to the Mozambique contract at some stage, we do hope to get that back once the commercial considerations are done on that. And that could well be into '22 before that happens. But we're -- we don't have anything in the pipeline at the moment that would be of considerable similar nature to the North American one.