Norcros plc (NXR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to our 2022 results presentation. It's really good to be here in person with you all today. And for today's program, James will take you through the numbers, and I will pick up the operations outlook and strategy. Before I hand over to James, I want to add some comments to the highlights on Slide 3. I said in November that the first half year was unprecedented and for very different reasons, the trading environment in the second half of last year continued to be so. In that context, these are an outstanding set of results on all fronts. And pleasingly, our response to these different challenges has again been exceptional. And as a result, we have continued to outperform the market. Our management teams, our supply chain infrastructure, our inventory holdings and our customer proposition has meant that we have responded better than the competition. And we've been able to build on our leading service offer, which has meant that we remain the go-to supplier. We've seen some of our competitors struggle, and we have been quick to respond and capitalize. Clearly, we've posted record revenues and profitability, and our balance sheet is in great shape. And importantly, we've made strong progress strategically with the acquisition of Grant Westfield. We remain confident that we have a market-winning model and formula, and I will expand upon this later. But in the meantime, I will now hand over to James, who will take you through the numbers.

Thank you. Thanks, Nick. Good morning, everyone, and great to see everybody. As Nick said, I will start by running through the results, which, as mentioned, do represent a record performance for the group. Throughout the presentation, I will compare to the prior year ended 31st of March 2021, but we have also included the pre-pandemic comparator for -- from 2020 for information. So turning to Slide #5 in the deck. Revenues totaled GBP 396.3 million, up 22.2% on a reported basis and 20.6% higher on a constant currency basis against prior year. 2021 was also a 52-week period, so it doesn't require a like-for-like adjustment. And just to note, against the pre-pandemic 2020 comparator, revenue was 20.9% higher on a constant currency like-for-like basis. In turn, reported underlying operating profit was a record performance of GBP 41.8 million and was 23.7% higher than the GBP 33.8 million achieved in 2021. Overall, the return on sales for the group was 10.5%, compared to 10.4% in 2021. The finance charges were GBP 2.5 million in the period compared to GBP 3.2 million in 2021. And this includes a GBP 1.7 million IFRS 16 finance charge, which is in line with '21, and bank interest of GBP 0.8 million, lower than 2021's GBP 1.5 million. Underlying profit before tax was, therefore, GBP 39.3 million, was 28.4% higher than 2021's 30.6%. Exceptional items include an exceptional credit of GBP 0.9 million relating to Groundwell, the only remaining surplus and legacy onerous property lease in Swindon, where we reached agreement with the landlord to exit the lease early. GBP 0.9 million was the remaining provision after that settlement. Pension scheme admin expenses at GBP 1.7 million was slightly higher than 2021's charge, largely due to increased costs from the triennial valuation and some inflationary increases. Acquisition-related costs in the year included amortization of acquired intangibles of GBP 3.7 million, and we also had GBP 1.1 million of costs relating to the acquisition of Grant Westfield. There will be further cost to come through in FY '23 as the acquisition completed after the 2022 year-end. The noncash finance charge totaled GBP 0.7 million and included pension scheme finance costs of GBP 0.4 million and GBP 0.2 million cost of amortization of debt raising costs. This compared to GBP 3.2 million in 2021, and the key difference being the financial derivative fair value cost of GBP 2 million in the prior year. And I think, as previously mentioned at our last results, we have now adopted cash flow hedge accounting for all future forward FX contracts, which removes this volatile noncash item from the income statement, and we now account for these movements through other comprehensive income. So overall, this resulted in an increased profit before tax of GBP 33 million, compared to GBP 18.5 million in 2021. So now looking at the revenue and underlying operating profit bridges on Slide #6. Starting with the top left chart, total revenues increased by GBP 72.1 million from GBP 324.2 million in 2021 to GBP 396.3 million. U.K. revenue was GBP 36.5 million higher, reflecting the increased sales across all divisions. It is pleasing to also record GBP 31.2 million of revenue growth in South Africa, reflecting increased demand and market share gains. A strengthening of the rand increased revenue by a further GBP 4.4 million. In total, as shown in the bottom left-hand chart, group constant currency revenue growth was 20.6%. Now looking at the charts on the right. Top right, underlying operating profit was GBP 8 million higher than 2021 at GBP 41.8 million, driven by the performance in both the U.K. and South Africa. The strengthening of the rand increased reported operating profit in South Africa by a further GBP 0.2 million. And finally, looking at the bottom right chart, underlying operating profit in the U.K. at GBP 30.9 million was GBP 4 million higher than in 2021, with the U.K. return on sales reducing slightly from 12.2% to 12%. Underlying operating profit in South Africa was also GBP 4 million higher in the period at GBP 10.9 million on a reported basis, and the return on sales was 7.8% compared to 6.6% in 2021. Overall, the return on sales for the group was 10.5% compared to 10.4% in 2021. So moving on to Slide 7 to look at tax earnings and the dividend. Regarding tax, the underlying tax charge for the period was GBP 7.8 million, and the underlying effective tax rate was 19.9%, higher than the prior year largely due to the profit mix with the increased profitability in South Africa. Applying the tax charge to the underlying PBT of GBP 39.3 million resulted in earnings attributable to shareholders of GBP 31.5 million compared to GBP 25.1 million in 2021. Reported diluted underlying earnings per share was 38.2p, a 22.8% increase on prior year. Turning to the dividend. Continuing with the group's progressive, albeit prudent, dividend policy, which takes into account our growth strategy with the key stakeholders' future cash flow generation and earnings growth, the Board has proposed a final dividend of 6.9p per share, bringing the total dividend for the year to 10p per share. So now looking at the cash flow, which is on Slide #8. In light of the ongoing exceptional supply chain challenges, the group proactively invested into inventory to optimize our service and stock availability. This resulted in an underlying operating cash flow of GBP 28.6 million in the period, compared to GBP 65.8 million in 2021, and a strong but reduced conversion rate of 63% of underlying EBITDA compared to 174% in 2021. The working capital outflow in the period was GBP 23.6 million compared to GBP 21.8 million inflow in 2021, and this reflected the substantial investment into working capital. Capital expenditure in the period at GBP 5.4 million reflects an increase against 2021 and represented circa 1x depreciation. Cash tax paid was GBP 6.5 million, higher than the GBP 3.5 million in 2021 due to the increased profits. Interest paid of GBP 2.5 million includes the GBP 1.7 million of IFRS 16 lease costs and bank interest costs of GBP 0.8 million. So net cash outflow in the period was GBP 4.5 million, compared to GBP 46.5 million inflow in 2021. And this is post dividend payments of GBP 9.1 million being the full -- the FY '21 full year dividend of GBP 6.6 million and the FY '22 interim dividend of GBP 2.5 million. So turning to Slide #9 and the balance sheet. Net cash was GBP 8.6 million, excluding finance lease liabilities, compared to net cash of GBP 10.5 million at the 31st of March 2021. This reflects the cash generation in the year and the investment into working capital. And I think, importantly, the balance sheet remains strong and in good shape. The group continues to have significant liquidity and funding headroom by its banking facility, which was renewed in the year. This is a multicurrency RCF with 4 lenders, and we have now committed banking facilities of GBP 130 million, in addition to a GBP 70 million uncommitted accordion with an initial maturity date of October 2025. With a cash balance at the year-end, leverage was nil. And following the acquisition of Grant Westfield post year-end, pro forma leverage is approximately 1x EBITDA. Net assets increased to GBP 200 million, compared to GBP 148 million at March '21. And to note, we now have a pension scheme surplus of GBP 19.6 million, and there's more detail on Slide 10. So just turning to Slide 10. The pension scheme has again considerably improved. The IAS 19 status has moved significantly during the year to a surplus of GBP 19.6 million from a deficit of GBP 18.3 million. One of the key drivers being the increase in the discount rate. Liabilities reduced to GBP 368 million, driven by both the increase in the discount rates and benefit payments made in the period. This was partially offset by an increase in the inflation rate. Assets reduced by GBP 10 million compared to March '21, largely due to the benefit payments made in the period, and this was partially offset by asset gains. The cash contribution wasn't changed at GBP 3.3 million, and that was paid in accordance with the previous recovery plan. And finally, to note, the triennial valuation dated March '21 was agreed in the year with a new deficit recovery plan. The actuarial deficit at March '21 was GBP 35.8 million, compared to GBP 49 million 3 years earlier, and deficit repair contributions have been agreed at GBP 3.8 million per year and with both the group and the trustee regarding this as a good outcome. Nick, back to you.

Thanks, James. Moving to Slide 12. I just want to kick off with some key messages. As you've seen from the numbers, the business is in great shape. We've delivered a record performance in revenue and operating profit. And I think the strength of our proposition and the breadth of our distribution channels has been absolutely key. In November, I said that we benefited by backing the COVID winners, the small-format specialist players as we refer to them. That was the case then. But as COVID restrictions have eased, consumers have now reverted to the more traditional channels. And our exposure to these traditional channels, including the national merchants, the buying groups, and the specialist retailers, is significant and we've clearly benefited from our broad exposure. We've outperformed the market because of the diversity of our business model and the resilience of our revenue streams. And without a doubt, there has been a flight to quality. I also said at the interims the supply chain challenges and the significant cost pressures have perversely played to our strengths compared to many of our smaller competitors, and that remains the case. So we've been better able to deal with these challenges using our scale, financial strength and our supply chain infrastructure. And we've taken advantage from the demise of some long-standing competitors in both geographies. We've also been busy making good progress on our growth strategy. I said I was confident that we would add a complementary business to the portfolio. And I think the acquisition of Grant Westfield, in my opinion, hits all the spots. More than ever, our business model and growth strategy remain very much on point. And before I dive into our performance, I just want to take you through some of the attributes that I believe make Norcros quite unique in our industry. Turning to Slide 14. So the Norcros DNA, which I fundamentally believe is a key driver of our outperformance, I think this slide is important because it captures what Norcros is all about. The Norcros DNA is what differentiates us from our competitors, and these attributes continue to drive our outperformance. So our single product business focus, our management teams, our market-leading positions and our diversified channels and our commitment to investment in new product development are just some of the more important elements of our DNA. As you will see on the next slide, Slide 15, our strength through the diversity of our channels has been a key differentiator in the last 12 months. I mentioned, as COVID restrictions have eased, we've seen a shift from the specialist online players in our industry to the more traditional channels. And again, this has played to our strengths. And as you can see, our business in the U.K. is not over-indexed to DIY retail. And any normalization in RMI should, in my opinion, not impact our business to the same degree as many others in the industry. And this slide clearly demonstrates that approximately 70% of our U.K. sales are in the trade, specification and specialist retailer segments, a large part of which continues to serve our leading positions in the housebuilder segment. So our strength is in the diversity and breadth of our channels, which means we should not be overly exposed to any boom and bust of RMI. Another important element of our success has been our commitment to innovation and new product development, and this remains our lifeblood, Slide 16. Our investment in new product development continues unabated and remains a key differentiator. Slide 16 shows a selection of some of our exciting new products from the newly launched Knurled Fusion range in the top left by VADO to the award-winning 1901 tile range from Johnson U.K. in the bottom left. And the acid test of our commitment is our product vitality rate, which we've maintained at a high level of 29%. So clearly, investment in new product remains very much at the forefront of our commercial strategy. Now turning to our business performance, Slide 19. As you can see, our performance in the U.K. was excellent. Total revenues, some 16.6% higher than the previous year. And pleasingly, all of our U.K. businesses grew their revenue, again demonstrating the importance of our broad channel coverage. MERLYN and Abode were the standout performers. So how did this translate into profitability? Slide 20. Our U.K. business continued to sustain the recovery out of COVID and navigate the many supply chain challenges and input cost pressures. The results were excellent with record profits, some 15% ahead of prior year and margins maintained at a high level. And again, strong performances across all our businesses with Triton and MERLYN being the most significant contributors. Turning to our South African business, Slide 22. The drivers of the recovery in South Africa were very similar to the U.K. Total revenue grew by 29% in the year. And again, all our businesses grew, and we undoubtedly gained share as some competitors struggled. Tile Africa was a star performer, growing revenue by some 32%. And in House of Plumbing, we capitalized on the demise of a competitor in the civils plumbing space by adding 4 of their former branches to our network. So all in all, an excellent performance, again demonstrating the strength of our market position. In terms of profitability, Slide 23. Our profit performance in South Africa was outstanding. We grew profits by GBP 4 million in absolute terms and by some 58% to a record level of GBP 10.9 million. Tile Africa and TAL were the standout performers, and we continue to believe that the medium-term prospects for our business in South Africa remain very positive. Moving now on to outlook and strategy, Slide 25. I appreciate all of this is very familiar to you. At Norcros, new housing and house moves remain important and robust drivers for us in both the U.K. and South African segments. What I would say is that I fundamentally believe that the housing sector will continue to offer opportunities to offset any softness in consumer demand as house prices continue to increase with strong demand and structural shortage of both private and public housing supply in both our main geographies. In terms of our strategic thinking, Slide 26. Well, the strategic vision, that still holds very good. The different challenges of the last 12 to 18 months haven't changed that. And I think, on the contrary, our performance and success has strengthened our conviction that our vision and strategy remain very relevant. The targets are appropriate demanding but achievable, and the strategic initiatives supporting the strategy continued to deliver outperformance in our markets. In terms of some of these initiatives, Slide 27. So this was a conscious decision perhaps 10, 12 years ago to focus our resource on this particular sector, and this sector focus, which is the evolvement of the leading position in the U.K. housebuilder market, well, that's held us in good stead. And as you can see through the white spaces on the slide, there remains lots of opportunities, and we've successfully leveraged our strong relationships in this sector when we acquire new businesses. And the MERLYN acquisition would be a very good example of this. We also believe that there are similar significant opportunities with the Grant Westfield business. M&A, of course, is another important initiative. Slide 28. The acquisition of Grant Westfield is a good example of us successfully leveraging our knowledge of the industry and our acquisition track record. Grant Westfield is a compelling strategic and financial addition to the group, and we're delighted with the strong support from all our stakeholders and really excited about how we can extend the growth of this business under the Norcros umbrella. So we're busy on the integration, and we're busy focusing on the many business development opportunities. And we're confident that these growth opportunities will be meaningful and that margins can be sustained at industry-leading levels. Slide 29. So this is the famous jigsaw slide. Somebody asked me why is there a missing piece on the top right. I couldn't really answer that one, but our acquisition pipeline continues to be well developed, and our objective of completing the jigsaw on this slide continues unabated. And it's probably fair to say there remains significant opportunities of different scale to add to our increasingly attractive portfolio. Another important strategic initiative over the last 12 months has been our investment in ESG, Slide 30. We've invested considerable resource in the second half of last year in developing our ESG strategy, and we worked extensively both with The Carbon Trust and with CEN-ESG, a specialist consultancy. We've undertaken a materiality assessment, and we are aiming to have our initial ESG plan in place by the end of the year. And as you can see, we've made solid progress on all 3 pillars, including a new ESG governance structure and the first time we will be reporting compliant with the new TCFD requirements. At the same time, we continue to focus on improving our operational excellence, Slide 31, and this really has paid dividends in the last 24 months. Here, you can see the depth and breadth of our supply chain infrastructure in China. So we've been importing components and subassemblies from China for over 20 years, and our expertise here is market-leading. We have 30 people on the ground in several locations near our supply base. And our model, just the same as it is in the U.K., is to enjoy the benefits of focus with specific offices dedicated to specific products, combined with the benefits of scale and the sharing of intelligence. And as a result, we've been able to deal with all the supply chain challenges, in my opinion, better than our competitors. And frankly, I think that dealing with the challenges better than our competitors aptly sums up our game plan. So in conclusion, gentlemen, to conclude this morning's session, I could ask you to turn to Slide 33. So just a few things to leave you with. I think this year has been another unprecedented period with a set of different and fresh challenges, and our business has again emerged in great shape, a resilient, well-invested business, record levels of profit and our business stronger financially, but also competitively. And we continue to import it from our most demanding customers for our service, and we've gained numerous awards for our great products. We continue to invest in our ESG agenda, and we're making strong progress here. Many of our products have strong e-credentials, and it's an increasingly important element of our commercial strategy. Our business model and our management teams have again responded admirably to every challenge. And as James has shown you, our balance sheet is in great shape. We have a very clear, very focused strategic agenda. And the acquisition of Grant Westfield, not only a great fit strategically and financially, but it further demonstrates our confidence in our strategy. So our vision and strategy remain valid and relevant, central to everything we do, and we remain very committed to it. So gentlemen, that concludes today's presentation. Thank you for your patience and attention this morning. I think we're going to take some time now for any questions.

I think there's a mic.

I'm not sure if this is working. But given the surplus in the pension scheme now, is there increased scope for higher leverage? And if so, would you see your optimal level being above 1x?

James, do you want to?

I think, firstly, Nick and I have always had a conservative approach to leverage. I think we've openly talked about 1.5x to 1.75x, potentially going a little bit higher for the right transaction, should that be -- have a pathway to reduce that leverage in a short time frame. Obviously, it's good news about the pension surplus, but you've got to remember that's on an accounting basis. It's not on a technical provision basis. But I think, overall, I think it doesn't impact our overall approach to leverage, no, but clearly pleasing news about the accounting surplus.

Okay. Great. And the second one for me, in terms of the first 2 months of the year, I think you said it was 1% revenue growth, and this is against a tough comp. Was there any impact from supply chains and the lockdowns in China impacting those first 2 months? And just how tough was that comp? I mean, I think, if remember correctly, those 2 months came a very strong recovery off the back of lockdown to the U.K. Is it just purely a tough comp? Or is it partly to do with the supply chain issues as well?

I'll take that, Tom. It's a good question. I think the first thing I would reiterate is that comps were stellar comps. We came out of the box very strongly. And in fact, the first half year, if you look back at your data, I think we were something like 36% ahead in the first half versus the previous year and more moderate in the second half. So the comps were very tough indeed. The supply chain, I would say, on the supply chain that the supply chain issues have moderated for us because, as you've seen from the balance sheet and the cash flow, we have vastly increased our inventory holdings deliberately and ahead of Chinese New Year. So from a supply chain point of view, less of an issue. I think this is where we can steal a march on the competition because we can -- we've got the balance sheet to invest in inventory where others haven't. So we've definitely stolen a march. And we didn't make any comment about the holiday, the holidays. More holidays in April and May this year compared to the prior year, and that is -- that was quite disruptive, I think, to retail footfall.

Yes, it's very encouraging.

Sam Cullen from Peel Hunt. Could you give some commentary on the mix between price and volume, both last year and in the first 2 months of the year? And then also, I guess, back comp, was there a significant difference between April and May? I guess the holiday timing might come into it. That's the kind of the first one. And then on kind of margins. Is this peak margin for the -- or last year peak margin for the business? Or do you think margins can continue to kind of creep up over the medium term? And then on the inventories, should we expect that to unwind? Or should we expect sort of working capital to be kind of neutral from here?

Okay. So I think that's 4 questions. So just in terms of the selling price and volumes, so we would reckon there's about 50% price on '21, '22 versus the previous year. So 50% of the value growth is price-related. So around about 10% to 11%. And that varies quite significantly by product area. Clearly, high hikes in energy prices, in copper, in glass, stainless steel and then substantial increases in sea container rates. In terms of margins, I guess that does depend on the mix of our business. The Triton and MERLYN businesses had particularly strong performances in '21, '22. If that mix continues, then there's no reason why we can't maintain them at that sort of broad level that we're at in the U.K. And then I think you asked the question about was there any difference between April and May. I think not really, not noticeably, because I think both periods were disrupted by holidays and the way Easter fell in terms of this April compared to last April. And then, of course, you have the 2 Jubilee holidays in May -- in our May. So I wouldn't read too much into the difference between April and May. And I think the final question was on inventory, wasn't it?

Yes. So obviously, the stock investment -- inventory investment was over GBP 20 million and is substantial.

So the conscious decision to do that, we think it's the right thing to do to support our business units. It has helped them gain market share and maintain that service, which is proposition, which has been important. I think, going forward, probably don't see that unwinding in the short term, potentially even increasing very slightly. I think partly because we have the balance sheet to continue to support our business units; and secondly, I don't think it's a case that those inventory levels are excessively high. However, counter to that, of course, it is an ongoing discussion point in terms of making sure we optimize and are as efficient as possible with those inventory levels. So they don't get too high and they don't get carried away, and we talk about that at every monthly operating Board meeting that we go to. And then, of course, you do have for your models the acquisition, working capital as well, which is about GBP 10 million from the Grant Westfield business.

Can I just have one follow-up on the pricing? You mentioned sea container rates. They've come off, I think, 30% or so from the peak. How much are you guys are thinking about the prospect of potential deflation into the second half of this year or first half of next year if you see commodity prices come off and container rates normalize? Is that a risk you see to the business?

I wouldn't be building that into our assumptions. Because certainly, if you take the example of sea container rates, that's going to take some time to unwind. And as we've said before, just now, the fact that we've increased our inventory holdings means that's going to take some time to unwind and benefit the income statement over time. So it's pleasing to see the direction, but would I be baking in less than USD 2,000 for a container in the balance of this year? No. No, I wouldn't because there's 2 things still impacting the whole supply chain. One is the rate and the second is the availability. But I would emphasize that given our scale then we're better able than the competition to use that scale to our advantage. And we are -- we always look at this from a group perspective. It's one of the synergies that we do drive, so we should be able to outperform the competition on that.

You've mentioned the competitors a little bit today, Nick, and a few of them showing stress last year. I mean, where do you think they are on stock levels at the moment? How are their finance, as you know, are we seeing any kind of stress situations. And I suppose, could that bring about any opportunities for further M&A from that? And the second one is just a quick one, just a quick refresher on Grant Westfield. How has that traded over the last couple of months? And how is its inventory position at the moment?

Okay. So I think the -- all the segments that we operate in, other than probably showers, highly fragmented, and there's a slide at the back of the deck that we show on a regular basis. So we're competing with businesses that might be at the GBP 5 million, GBP 10 million revenue scale. Obviously, there's some bigger ones, depending on some segments. So I think, competitively, that's where we're winning market share from. Because the most important thing for a client is service and availability and reliability. If you think about our product, our product is what I call a finishing product. It's an end product. So you talk about the housebuilder. The reason why we've got that fantastic list of housebuilders as clients is because not only our product quality, but our service and deliverability. And if you're ready to exchange on a house and you've got a kitchen or a bathroom that needs the final finish, then you don't want to be let down. So I think in a long while, service and availability has almost been a premium to price discussions. And that's one of the reasons why we took the conscious decision to invest even more in inventory. Because that service and delivery promise alongside discussions with 10% to 20% selling price increases helps to ease that discussion. So I think we will not necessarily -- we won't be looking at targets which are turnaround situations. We want to bring into the portfolio businesses that have the similar characteristics to Grant Westfield, to MERLYN. So businesses of good growth track record, profitable, cash generative that we can grow faster and leverage our -- those broad channels that were on that chart and the housebuilders. So for example, Grant Westfield do some business with Barratt. It's not significant. Now we should be able to leverage our position to get into those housebuilders and some of the specialists, what we call small-format players, the likes of Screwfix, Wickes, people like that with that product, which we absolutely did. Highly successful. So we've built those accounts into multimillion pound accounts within a couple of years. Grant Westfield trading is trading in line with expectations. We're very pleased with how they're trading, and there's no issues as we speak on supply chain. So the -- what are we? 9 days into -- but I was having a conversation along those lines with the Managing Director of Grant Westfield yesterday, but -- and it's been -- the acquisition by Norcros has been well received by employees, by customers and suppliers. So the integration we see is relatively smooth. Any further questions from anybody?

[Operator Instructions] We have a question from Andy Murphy of Edison Research.

A couple of questions, if I may. I had a few more, but have been knocked off steadily. So 2 questions. First, on the cost of living crisis, can you -- have you seen any evidence yet coming through? And if it -- if there is any evidence or if there's likely to be evidence, which line of work or line of business do you think you'll see in first? And secondly, just reading through the notes that you put out this morning, it was like a couple of businesses are not profitable at the moment. Can you just perhaps outline the plans to either return or bring these businesses into profitability?

Okay. So taking that first one, I think it's difficult to say about the cost of living crisis. I think I'd turn it straight on its head by saying that our exposure to those channels, which we believe are going to remain very robust, such as the housebuilding and in particular, we don't see that changing overnight. And I think, touching on what we said earlier, I think it -- because our competitors are having supply chain issues, in fact, the opportunities for us to displace some of those competitors has actually improved because they don't have the wherewithal that we've got. So I think the probability of making some of those switches for some of those leading housebuilders is probably greater than it's ever been because these are the reasons why we're attracted to them is they're sticky, resilient contracts that typically have a duration of 2 to 3 years. And I can only remember one, and it wasn't a top 10, it was outside the top 10. I think I can only remember one where we didn't see a renewal. So for example, Barratt, who are the leading housebuilder, we have been supplying Barratt for certainly in excess of 5 years. We probably had 3 renewals with Barratt. So difficult to discern about the cost of living. I can only read what you read about impact on footfall in retail. Again, go back to the dynamics of our U.K. channel mix, then our DIY retail piece is we're under-indexed deliberately. And that should, in fact, play to our strengths. In terms of the U.K. Tiles business and the other business that you mentioned, we have plans in this year to return both those businesses to profitability. I think just a marker on the U.K. Tiles business is that, that was the business that basically bore the brunt of significant energy cost increases. And we have a plan, which involves hedging. We've already hedged the energy for '22, '23, and we've just gone out with a significant price increase to match that energy hedge. So we're confident we can get those businesses back into EBIT with a positive.

We have no further questions on the phone line, so I'll hand back.

Okay. Many thanks, everybody. Thanks for your patience. Thanks for your attention.