Marlowe plc (MRL) Earnings Call Transcript & Summary

Good morning, and welcome to Marlowe plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand over to Alex Dacre, CEO; and Adam Councell, CFO. Good morning.

Thanks very much. Good morning. I'm Alex Dacre, Chief Executive of Marlowe. I'm here with Adam, our Group Finance Director. This morning, we're going to take you through our recent half year results and give you a summary of our company strategy and open up to Q&A. Before we kick off, we'd like to show you a short video on the corporate strategy of the company. [Presentation]

Great. Hopefully that was a useful introduction to our company strategy and the range of compliance services and software that we provide. As I say, we recently announced our half year results to the market, and we'd like to take you through some of the highlights of those results. So I'll kick off and then hand over to Adam to take you through some of the financial side of things. We had a good half. So revenue was up 66%, and that was driven by strong organic growth of 8% and a significant contribution from acquisitions. We saw adjusted EBITDA grow by 80% to just under GBP 40 million, GBP 39.2 million and EPS grew by 39%. A key element of our strategy is to strengthen our operations, to expand our margins and to improve our returns. And we are pleased to report that divisional EBITDA margin has increased by a further 100 basis points to 19%. So this is fast approaching our medium-term target of 20%. This is the product of effective integration programs, our investments in higher-margin software businesses and improved operational efficiency and productivity across our 6 business lines. We expect this margin accretion to continue to develop and to deliver as we implement further operational efficiencies and add further scale to our platforms. So we're making good progress towards the financial targets that we set in FY '21 to reach GBP 500 million of revenue and GBP 100 million of EBITDA by the end of next financial year. So our current run rate is GBP 468 million of revenue and GBP 83 million of EBITDA. So we continue to expect to exceed those original aspirations in advance of that original target at the end of FY '24. Our total addressable compliance markets are very large. We have over GBP 8 billion of market to go after. And we continue to selectively take advantage of this fragmentation to deliver on our bolt-on M&A strategy. So we deployed GBP 44 million in the first half into further acquisitions and we achieved an average multiple of 6.8x. So an attractive valuation. And that's on a pre-synergy basis. Once we integrate those businesses, we would expect that valuation to come down by probably a turn or 2 of EBITDA. We are the clear U.K. leader in compliance software and services. None of our competitors are able to serve customers across the breadth of compliance markets that we can. We really do provide a turnkey approach to compliance. As you can see on the page, that's across software, health and safety, employment law and HR and occupational health on the GRC side of our business. And fire safety and security in water and air hygiene on the TIC side of our business. We now employ around 5,500 professionals. Roughly 2/3 of those professionals are customer-facing fee earners involved in the delivery of our compliance services. So hundreds of health and safety consultants, HR consultants, employment lawyers, occupational health clinicians, doctors. We employ 130 compliant software developers now, fire safety technicians and water hygiene experts. And we're delivering really the full range of the compliance and business-critical services across a base of about 50,000 customers across the U.K. Customer relationships are strong. They're durable. Customer attrition is running at around 7% per annum and we're very well diversified. So our largest customer represents around 2% of group revenue. Our capabilities across compliance, service and software means that a complementary service or product can easily be cross-sold to the same customer, to an existing customer. Those customers might be the Head of Compliance for an organization, a Health and Safety Director or the owner manager of a small business. So whoever is responsible for compliance within the organization, that's our channel to market, and that's our customer. And everything that we do for our customers helps them to navigate complex regulations. So you can see from the slide some of the key regulations that underpin demand from our customers, that they range from the Health and Safety at Work Act through to the Fire Safety Reform Order or the Employment Rights Act. This focus on regulation supports what is a very resilient business model. And that resilient business model means that we're well placed to produce a consistent financial performance really throughout all macroeconomic environments. And that resilience can be seen in the organic growth that we've delivered over time. It shows that the underlying demand for our products and services is consistent throughout the economic cycle. The resilience is also demonstrated in the increasing margin that we've delivered over the years. This reflects a well-controlled cost base, our drive for continuous operational improvements and also the pricing power, which gives us the ability to pass on cost increases to our customers via price increases. The services that we deliver are nondiscretionary. They're a relatively small operational expense for our customers and they are essential to the legal, the compliance and also the efficient running of their organizations. We're embedded very well into our customers' operations and the switching costs are significant. So change represents a heightened risk of noncompliance for our customers. So it's unattractive to move away from the services we're delivering if we're achieving a good standard of compliance for our customers, which, in general, we are. The more we cross-sell to our customers, the more that relationship with them strengthens. So if you think about a typical customer for Marlowe, they might take a 4-year subscription for HR compliance. That might be alongside a subscription for compliance, eLearning to train their staff in compliance. It might be alongside HR software, a retained health and safety contract and perhaps health and safety software, too. And it's by bundling those services through the same channel that we improve compliance standards for our customers but we also strengthen our relationship with those customers and embed ourselves more closely with their operations. Around 40% of our customers are now taking multiple services from the group. So 40% of our revenues are coming from multiservice customers. The subscription and multiyear nature of our services and software also gives us very strong earnings visibility. Around 85% of our revenues are recurring, typically on 3- to 5-year contracts, and the customer relationships are long. So typically, we keep customers for over 12 years now. I'll now hand over to Adam to take you through some of the financial detail before he passes back to me to update you on our digital strategy and some of the attraction of our markets.

Thanks, Alex. So in terms of revenue for the first half, that increased by 66% to GBP 223 million. That splits into 2 buckets. Obviously, the impact of acquisitions, which was 58% of that 66% growth was resulting from acquisitions made in the both FY '22 and the first half of this year. We completed 10 bolt-ons in the first half of this year. And obviously, we deployed just over GBP 300 million on M&A in the last year. So we had a very active year. In terms of the other part of that revenue growth, it was organic growth, which was at 8%. And there's 3 sort of buckets within there. So we've got the impact of pricing. So obviously, our costs increased by around 4%, mainly driven by increases in inflation in the first half, and we've managed to pass that through in the form of price increases pretty successfully in the first half. In addition, we also estimate that cross-selling and upselling continue to contribute to 1.5% to 2% to our organic growth target. And then the remainder is coming through new business net of customer attrition, in particular, TIC's a particularly strong first half. So below that revenue line, we find that EBITDA has increased by 80% in the first half to GBP 39.2 million, and that equates a 100 basis point improvement in divisional EBITDA margin to 18.8%. And that's been driven by 2 things. Obviously, the impact of the increased scale of the GRC division and also then a good operational performance of the TIC division. In terms of adjusted operating profit, that's up 85%. We have seen increases in interest costs driven by 2 things, the higher level of base rates, but also increased utilization of the debt facilities as we expand or continue the growth strategy. And that's meant that adjusted profit before tax increased by 74% to GBP 26.4 million. And EPS has gone up by 40% to 22.3p. And obviously, that factors in increased number of shares in issue following equity raise during the last 12 months. In terms of the GRC division, obviously, last year was a particularly transformational period for the GRC division with much of the $300 million we deployed on M&A falling in this division. That means that revenues have increased by 168% to GBP 92.3 million. The organic growth was at 7%. So that's good performance. And obviously, we've then seen the -- both profit line, the EBITDA gain of 125% and the operating profit gain of 117%. In terms of the EBITDA margin movement, that's driven by mix. So the -- our occupational health business runs at lower margins than the rest of that GRC division. And obviously, that business has increased its scale significantly following the Optima acquisition we completed at the back end of last year. Actually, if you exclude occupational health, the margins in this division actually moved forward by around 300 basis points. So underlying, the rest of the division is doing as we expected in terms of margin improvement. In terms of the TIC division, revenues were up by 30% in that division to GBP 130.6 million with very good organic growth in this division of 9%, and that reflects new customer wins, lower attrition and strong upselling. In terms of margins, they actually moved forward. So therefore, the EBITDA was up 35% to GBP 18.1 million, and the operating profit was up to GBP 12.8 million, up 39%. As I say, the margins move forward by 0.5%. And actually, that's in addition to a 120 basis point improvement in margins in the last financial year. So what you're seeing from this division now, which has very little mix movement in there, is actually just consistent increase in margin on a year-on-year basis which is really the benefits of integration we've made in the earlier period of Marlowe's history. So we're seeing the long-term benefits of investing heavily in integration in this division. So moving away from the P&L and looking at return on invested capital. So here, we've got -- you can see down on the left how we see our cost of investment side of the equation. So in total, at the top there, you see we've invested GBP 675 million in our M&A to date. And that is made up of obviously the cash consideration paid and then obviously, deferred consideration payments to come. But also we see restructuring costs and acquisition costs as an integral part of the cost of investment calculation, and that's why I've included those. In terms of what you can see, the group's return on invested capital is 13%, but I would like to highlight the difference between our 2 divisions. And the reason for that difference is around timing and how long we've been investing in those different relevant divisions. So TIC is running at 19%, which is a really strong performance and shows the benefit of us investing heavily in integrating those businesses from when we started building that division back in 2016. So we've been building that division for 6 years. And that's why you can see the consistent growth in the return on invested capital over time. And that's driven through those margin improvements I highlighted on the previous slide that you can't get those unless you invest heavily in integrating businesses. On the other hand, GRC is running at 10%, and that's because most of that business has been built in the last 18 months and you can see by the gold bars on the chart there that obviously, we've only just bought much of our GRC division. So therefore, we are still in the process of integrating those businesses. And we would expect, therefore, the returns on investment to increase over time. Also what's reflected in GRC is we've had -- we pay a higher valuation on those businesses because their inherent organic growth and margins are higher than TIC. So therefore, we would expect to see that group 13% number increase over time, driven through both the growth in ROIC in both divisions, but in particular, in GRC. So just touching on the cash flow. In terms of how we -- as I highlighted, the way we see restructuring and acquisition costs, they're part of our cost/investment equation. So therefore, we look at our operating cash flow before those outflows for restructuring and acquisition costs. So therefore, net cash from operations in the first half was GBP 22.6 million. That was held back by a working capital outflow of around GBP 16 million, which was in part due to timing. It was about a GBP 10 million of working capital we expect to come back in the second half, about GBP 4 million of which is due to timing of payments, i.e., prepayments and about GBP 6 million is due to billing timing, which was a result of our integration process that we've been undertaking. So we integrated several systems in our water business, which actually meant that we added about 2 weeks to our billing cycles in the first 6 months. That was a deliberate act on our part to ensure that the invoices that we send to the customers are correct because whenever you change systems, that's one of the primary things you want to ensure you get correct. So we are returning to normal process in terms of billing processes. Therefore, that temporary GBP 6 million you see there will return in the second half, so will the GBP 3.8 million above it. So we should see cash flow improving significantly in the second half. In terms of CapEx, that's GBP 7.6 million in the first half. That's obviously just increased through the increased scale of the group. As we've bought more businesses, they come with higher levels -- they come with inherent levels of CapEx within them. So therefore, that's fairly reflective of our current run rate of CapEx. In terms of our leverage position, so at the half year, net debt excluding leases of GBP 156.2 million, which reflects a 2.1x leverage, which is roughly in the middle of our window of 1.5 to 2.5. Obviously, given current market views on leverage, we're more aware of where we'd like to pitch that leverage and maintain it around a 2x level rather than pushing towards the 2.5 window that we've got there. So in terms of a summary for me. Obviously, the first bullet there just highlights the fact that we've actually had a very good operational performance in the first half, revenue up 66%. Good organic growth. EBITDA margins improving, and that's being reflected then in the increase in PBT and a 39% increase in adjusted EPS. We have been investing heavily in the first 6 months in the integration of acquisitions, and we do that in order to drive ROIC in the future. That will continue through the second half and then will fall away as we move into the next financial year. Underlying cash conversion, actually, when you strip out those time difference, it's actually relatively good. Obviously, we will be focused heavily in the second half on ensuring that working capital GP 10 million timing unwinds. And our return on capital employed is at a good point at 13%, but we see significant headroom for it to grow in the future as we drive the integration of the businesses. Our debt facilities, we did increase in October to GBP 233 million. We haven't drawn on that extension. Effectively, that is providing additional headroom for the group, which is a good practice at the moment. And obviously, the finance costs do reflect the significant increase in borrowing costs that we've seen, particularly in the middle of this year. So that reflects, obviously, the higher and large debt facilities we have in place. And obviously, off the back of that, actually, our trading expectations in the year actually increased slightly, but obviously, that's affect -- the increased finance costs has obviously affected the underlying earnings per share impact for the analyst forecast for the second half. That's it from me. So I'll hand back to Alex.

Okay. Thanks, Adam. We're confident of our ability to continue growing organically in the high single digits because of various factors. We're in attractive markets that benefit from attractive structural growth, which provides really the platform, really the setting for our future organic growth. Regulations are constantly evolving, and our clients need up-to-date insights across what is another more complex regulatory landscape, stricter insurance requirements, regulatory fines associated with noncompliance are on the up. The average health and safety fine in the U.K. has increased by 381% between 2018 and 2022. Likewise, we're seeing that the emerging legislative impact of ESG is adding momentum to our markets. It places much greater emphasis on employers to improve the well-being of their staff, to improve the safety of their staff, to implement good governance practices, good compliance practices as well as enhancing their impacts on the environment. As a result of that, we're finding that our clients are applying bigger budgets to compliance, and we're dealing with more senior individuals within our customers' organizations. So that structural growth backdrop is resulting in markets that are growing at somewhere between 3% and 5% depending on the vertical. And the second factor that gives us confidence is our success in bringing together Marlowe as really a cohesive compliance-focused platform. So we drive additional organic growth through cross-selling across our services and software. So we have very broad capabilities now. And that cross-sales focus has recently resulted in a 6-figure multiyear eLearning contract being sold to health and safety customers, another 6-figure contract cross-sold between health and safety and fire safety. So cumulatively cross-sales is adding about 2% to our organic growth each year. So 2% of that 8% is coming from selling additional services to existing group customers and embedding ourselves more deeply with those customers. And then alongside that organic growth, we have a dedicated and highly effective M&A function that are identifying new compliance markets, originating opportunities and negotiating attractive deals across our markets. We also have, as Adam alluded to, dedicated integration teams in each business who are very well versed and well experienced in bringing businesses into our model, onto our systems and aligning them with our processes. So that value-adding M&A and integration capability is what has underpinned our top line growth in the first half of 66%. I thought it was just worth updating you on our digital activities because this has been a newer part of the group, but it's grown rapidly and it now accounts for about 10% of our overall revenues. Somewhere between 20% and 25% of the group profits are now derived from software. And the scale of the digital opportunity at Marlowe is very significant, particularly on the GRC side of the business. So digital products are supplementing the group's compliance services as very core tools that our customers use to ensure, to control and to promote compliance across their business. The deployment of our software significantly improves compliance standards. It also improves the customer experience and makes them much stickier. And one of the reasons that we've seen increasing rates of organic growth over the year is because of this move into software, where we're growing, let's say, at a faster rate organically. Since our initial entry into the software market in 2018, we've really built a pretty rich suite of compliance solutions through both mergers and acquisitions but also organic initiatives. As I say, SaaS subscriptions now account for GBP 39 million of our revenues, a GBP 39 million SaaS ARR. In the last financial year, 6 additional software businesses joined the group. And we'd expect SaaS revenues to continue to grow as a proportion of total revenues as we benefit from the fast growth in this market, the diversity and relevance of our products to our customers and the organic growth benefits of our cross-sales strategy. And our software products coalesce very, very neatly with our service activities. If we're delivering health and safety consultancy, we also want to be implementing a health and safety software system. If we're delivering employment law and HR advice, then we will implement case management or an HR software platform and a suite of eLearning tools as well. And it's that ability to combine consulting and information with software that creates a really attractive model. If you can offer customers a mix of information, which provides the customer with relevant regulations, we do that via our Barbour business, then we provide consultancy to help them to understand how to apply that legislation to their organizations. And finally, the software that enables them to track compliance against the legislation. And that really is delivering a turnkey compliance solution. So we're going to open up to Q&A now. But just before I do, really to summarize. These results reflect a resilient, well positioned and growing business delivering service and software that's underpinned by strong customer demand throughout the economic cycle. So that organic growth rate of 8%, we're really pleased with and we've delivered that consistently over the past couple of years. And that strong organic growth is built on resilient markets that are benefiting from long-term structural growth drivers and our ability to compound that organic growth through bolt-on M&A and effective integration has also been key to that success. As I just alluded to, software has now become a key part of the proposition. We're enhancing compliance standards for customers and generating nearly 1/4 of our profits. So our clear strategy is delivering consistent and strong financial results in attractive markets, which gives us a great deal of confidence that we will achieve our medium-term financial targets of GBP 500 million of revenue and GBP 100 million of EBITDA in advance of that original timetable. Right, I'm now going to hand back to the host to take you through some questions that were submitted in advance. And I know that questions have been coming through on the platform whilst we've been speaking, so we'll get on to them after the pre-submitted questions.

Fantastic, Alex. Thank you very much indeed. Adam, thank you as well for the presentation. So ladies and gentlemen, do you please continue to submit your questions. [Operator Instructions] Just want to come and take a few moments to review those questions submitted today. I'd like to remind you the recording of the presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Alex, as you did say, we had a number of pre-submitted questions that came in from investors. You very kindly put those into a number of themes. Perhaps I could start off with the first one. The first theme we have really is around net debt, which I know we've covered off and there are some questions through the live presentation as well today. But this reads as follows, "The debt seems to be weighing heavily on the share price at the moment. Are you slowing the pace of acquisitions? Or do you have any plans to reduce the debt? Could anything have been done differently? Having these on variable rates has, in hindsight, been a mistake.

Okay. I'll pick up that and Alex can chip in if he thinks I've missed anything. So as I think I mentioned, our target ratio for leverage is 1.5 to 2.5, which is a relatively conservative position given the high level of recurring revenues and high margins we have in the business. And we also have the ability to delever quickly. But obviously, as I think I mentioned in the presentation, we're currently around 2.1x, that we won't be planning to nudge towards that 2.5x end of the range over the coming months as we try to make sure that we maintain a sensible leverage position given the market conditions. Just in terms of debt facilities, as I mentioned, we did extend those to GBP 233 million. But we haven't actually drawn on that extension at this point at the half year. So obviously, just wanted to ensure that we make sure we've got sufficient headroom to ensure that that's there to support the business as we go through the coming months.

Thank you very much indeed. Next question we've got here is, "Assuming an additional 0.5% base rate increase in December, what will the annualized interest cost be?"

So I think within the analyst forecast, they have actually built in a 0.5% increase in base rate up to 3.5%. If you look at our interest costs, around GBP 10 million this year and GBP 10 million next, actually, our run rate is probably then about GBP 12 million now, but obviously then, the GBP 10 million next year reflects the fact that net debt will reduce through next year. So our current run rate would be around GBP 12 million.

That's great. Next theme we've got here is acquisitions and a few questions on this that you can see as well have come through today as well. The first question reads, "Given the depressed share price and relatively low EBITDA multiple you now possess, does this reduce or remove entirely your ability to do accretive M&A? If you've averaged 6.8x this year on acquisitions, given the 6.8x is pre-synergies, what is the normalized post-synergies multiple you typically see in your M&A?"

Yes, why don't I take that one. So if you look at the last 18 months, we've had a very busy period from an M&A perspective. We spent GBP 320 million on deals last financial year. So far this financial year, we spent GBP 44 million. And when we were raising money for the Optima acquisition back in January, we were very clear with investors that we expected this financial year going into early next financial year to be a period focused on integration, driving synergies, implementing operational improvements alongside some smaller bolt-on M&A. And that's what we've been delivering so far this financial year. So the deals we've done in H1 have been small, have been for attractive multiples. And I think on a post-synergy basis, you can expect that multiple to come down by at least a turn of EBITDA. Looking forward into H2, I think we'd expect the pace to be probably even slower than H1. There are a couple of things we're looking at and working on and working out when the ideal timing would be for those deals. They might fall into next financial year. I mean the question on the rating, obviously, the rating has come down significantly in the last 10 days. I think from an EV/EBITDA perspective, we're sort of 9, 9-ish times at the moment. So we're still able to acquire businesses at significantly more attractive multiples than our own. So they are accretive, particularly if we're going to fund those deals from the cash that we're generating as a business. So if you look to next financial year, I think we expect to generate around about GBP 40 million of cash, which we would be looking to redeploy into attractively priced bolt-on acquisitions. And clearly, our focus is on making sure that the rating improves over that period as well, which would give us the ability to consider in the future larger transactions that would require the support of shareholders. But that's not the plan at the moment. The plan at the moment is focus on integration, driving synergies, keeping leverage at a conservative level and preparing for further M&A growth in the future.

Thank you very much indeed, Alex. Next question we've got here, "Are there any integration cases not so successful? Any lessons learned and remedial measures you've done? What are the results?"

Yes, sure. So I think the first point to understand here is when we set up Marlowe, we set us up with a view to making acquisitions and effectively integrating those acquisitions. And both Adam and myself have been involved in other listed companies where acquisition has been a tool to accelerate growth. So we've got a lot of experience in executing those strategies. And we've set up Marlowe with a relatively decentralized structure. So a relatively small head office and then 6 autonomous and very well-empowered business lines, each with brilliant management teams and significant integration resource dedicated to integrating businesses across the group. So because of that well-designed organizational structure, we are able to tackle a number of integration programs concurrently as really discrete projects. And yes, integration does present challenges. And over the years, we have seen lots of obstacles that we've had to navigate. But I think the fact we've been doing this for 6, nearly 7 years, means that we benefit from a significant track record and significant experience on that front. And we've got management teams and integration resource that have been doing this for a long time and have a very well-developed playbook of how to avoid the pitfalls, how to win the hearts and minds, how to implement our culture on the business, how to successfully transition IT systems and IT platforms and how to restructure businesses effectively. And if I think back a few years, I mean, in terms of things that have presented challenges for us, I mean sometimes, we've changed IT systems probably too quickly, and we've moved acquired businesses onto our platforms a bit too hastily. And that has then caused further issues down the line with data being in the wrong place, caused issues with processes not being quite right. But it's from those learnings that you then improve and enhance the integration playbook in the future. And now, when we're putting a new CRM system or a new accounting platform in place, we'll do it at a very measured pace, and we'll apply quite significant resources to those sorts of change programs so that we get it right and then we get it right at the right pace. I mean over the years, we've faced people issues. We've bought businesses and we've lost a couple of people we didn't want to. Actually, if that happens these days, and it doesn't tend to happen often, but actually, it's not a significant issue these days because we've got very good teams. We've got very good infrastructure in place. We've got the right operating models. So we're not reliant on particular individuals that we inherit as a result of acquisition. On the other hand, acquisition is a brilliant tool to bring brilliant talent into the business. And if you look at our top teams and also the second-tier management teams across the group, I'd say that at least 50% of those, if not slightly higher, are individuals that we've inherited from acquisitions who have gone on to take senior positions in one of our platform businesses.

Fantastic. Thank you, Alex. So the next question, I think you've actually covered off as part of that one but, "How did you describe your company culture? Do you tend to reshape the culture of those acquired companies or leave it as it's been?"

Yes. But I think the sort of common culture that exists across the group is one of entrepreneurial autonomy and the principle that power and responsibility should be placed very closely to one another. And then individual divisional cultures, I think it's slightly different from business line to business line. And because we believe strongly in that principle of autonomy, we leave it down to our divisional Chief Executives to design their company culture in a way that's right for their specialist compliance market as part of that overall Marlowe Group, which is all bound by that common channel to market, that common ambition and that common culture focused on compliance, expertise and collaborating closely across the group.

Fantastic. Thanks, Alex. Next question we've got here is, "Following the large acquisitions done last year, what do you expect the restructuring cost to be this full year? And how about in future years?" And I can see, [ Fran ], I thank you for your question, we've seen a number of questions around that restructuring costs as well throughout the meeting.

Yes. So now I think as I've highlighted there, we are investing heavily in acquisition restructuring at the moment. Obviously, that's largely reflective of the GBP 300-odd million we deployed in the last financial year. And only, obviously, Optima's a very large acquisition. Most today, restructuring takes place in the first 12 months of the acquisition and generally is finished within 12 months. I think the exception to that is probably Optima, where that is a large acquisition, so it'll probably take more like 18 months. Obviously spent about GBP 10 million on restructuring in the first half. There's about GBP 8 million to go in the second half. And then all the restructuring will finish next year based on the current portfolio of M&A. And that will be about another GBP 7 million in the next financial year, at which point, the restructuring costs will come to an end, barring further acquisitions. So in this current state, that's the timing on restructuring costs.

Thank you very much indeed. Next one we've got here, "On the restructuring adjustment, is it proper to show the cost of duplicated staff roles and operational costs? This does not seem to be standard practice with restructuring adjustments would be, given the benefit of costs on an adjusted earnings basis before you fire the appropriate employees and strip out the cost."

Okay. I think what's important here is we want to give a clear view of the underlying trading of our businesses. Excluding duplicated costs that are sitting in those businesses that is due to leave shortly is a view we want to give. And obviously, that treatment makes sure that we give that accurate view of the underlying trading of the businesses. In terms of that treatment, that's pretty consistent across other buy and builds. So we think the treatment is broadly in line with other companies.