RS Group plc (RS1) Earnings Call Transcript & Summary

Good morning or good afternoon all, and welcome to the RS Group plc Q3 Trading Update. My name is Adam, and I'll be your operator for today. [Operator Instructions] I will now hand over to David Egan to begin. So David, please go ahead when you are ready.

Thank you, Adam, and good morning. I'm David Egan, acting Chief Executive Officer and also Chief Financial Officer of RS Group. I'm joined on this call by members of our senior management team [Audio Gap] able to take questions at the end of this update. Welcome to our Q3 trading update to 31 December 2022. This quarter, we have continued to deliver further market share gains with our core industrial customer base. Our people are the greatest assets, and they continue to be brilliant. I, alongside the senior management team, thank everyone for their ongoing hard work. In December, Lindsley Ruth stepped down as Chief Executive Officer of RS Group, and we will miss his humor, knowledge and industry experience. I would like to personally thank Lindsley for all that he did for RS, our people, our stakeholders and for me. Thank you, Lindsley. But Lindsley has left the greatest legacy at RS, a great team and a purpose-led culture. Our people are empowered to continue [Audio Gap] strategy as we accelerate our profitable growth opportunities on our journey to Greatness. Our regional model has increased accountability and responsibility throughout the group, allowing our teams to utilize their local industry, customer and supplier knowledge to [Audio Gap] provide appropriate proposition. RS is in a strong position with passionate people who see significant growth opportunities. And last week, we welcomed Risoul to the group. We're really excited about the opportunities Risoul opens for us, and I look forward [Audio Gap] information on Risoul's progress in coming updates as our teams in the Americas has started working closely together already. Now moving on to our overview of our continued outperformance in quarter 3. Like-for-like revenue increased by 8%. Industrial Products, which accounts for circa 77% of our group revenue remained strong, delivering 15% growth, including low single-digit volume growth. We continue to gain market share within this area as evidenced by conversations with our suppliers, industrial production data and peer reports. Electronics revenue fell by 4% during quarter 3, reflecting the slowing market with industrial and electronics outperforming, more consumer-related electronics. Revenue from single-board computing products, which accounts for less than 2% of group revenue and is sold largely within our [indiscernible] almost halved due to lack of supply. We're moving our electronics range closer to our industrial customers' needs. We are well close to provide electronics expertise and solutions to our core industrial customer base, as their business has become more automated, digitized and connected. Our main own brand, top range, RS PRO, grew revenue by 19% and driven by enhanced brand recognition, strong product launches such as our energy efficiency range and better marketing tools that have driven greater conversion rates [indiscernible] Web revenue rose 9% like-for-like with digital accounting for 64% of overall group revenue. Our average order value from loyal customers has grown again reflecting the strength of our proposition. We continue to pivot our proposition and service towards higher-value customers. However, we are also developing a more cost-effective service such as using central [indiscernible] or increased automation to provide a more profitable offer to those lower spending customers. RS Integrated Supplies is delivering strong growth, reflecting increasing demand for our service as businesses look to consolidate spending through trusted supplies with transparent pricing. Our integrated supply business is trading above target, given growth in new business and from our existing accounts. And in EMEA, we are seeing improved trading within our core client base as they continue to recover from the pandemic and ensuring supply shortages, which have been holding back their businesses. So moving now to our regions. EMEA, which accounts for 61% of group revenue, grew like-for-like revenues by 12%, outperforming our industrial peers. We've enhanced our strategic supplier relationships, enabling us to broaden our product range and offer. We've increased our focus on our corporate and key customer base, our core areas of profitability. We've developed our service solutions proposition further with strong growth in our paid for services offers. Our strongest performing area is the U.K. and Ireland, accounting for roughly 40% of the region's revenue. This is where our go-to-market strategy is the most developed, and we have a lower proportion of electronics revenue and are therefore less impacted by the slowing market and product shortages. Revenue in the DACH region, which is Germany, Austria and Switzerland, despite having above-average electronics participation, delivered revenue growth marginally ahead of the group as a whole. The strength focus on underlying markets reflects the investments we have made to our commercial and operating model. Service levels are improving as the increasing utilization of our upgraded and expanded distribution center in Germany is resulting in more accurate delivery performance. Turning to the Americas, which accounts for 31% of group revenue. Like-for-like growth was [20%] against very strong comparatives of 37% last year. Our revenue per day remained strong, and we continue to drive our transformation within the region from a supplier of components to an industrial solutions provider with improvement in our focus areas of growth in our B2B customer base and increased average order value within our key and corporate customers, due to improved sales force initiatives. An improvement in our digital offer due to more targeted sales campaigns and greater collaboration across business functions, and better availability due to the increased capacity at our Fort Worth distribution center and investments into our product offer. We continue to invest to support future growth, especially after generating over 40% revenue growth over the last 18 months. We have a strong team in the Americas, excited about our growth opportunities through widening our product range, developing service solutions outcome, aspiring our reach into Latin America with the acquisition of Risoul, growing our customer base and developing our margin further improving our cash returns. We are annualizing over USD 1 billion of revenue and can see how our proposition is gaining traction. Turning now to Asia Pacific, which accounts for 9% of group revenue. Like-for-like revenue fell by [8%]. Our revenue performance continues to be affected by several factors that we've talked about before. The slower electronics market which is 35% of the region's revenue, lack of single-board computing products due to global chip shortage, which is a lower-margin product but [indiscernible] 6 percentage points of the region's revenue growth rate during the quarter. Cost comparatives at a more challenging backdrop in China with COVID lockdown, difficult economic conditions and the chip export ban. Although China is less than 2% of our group revenue, it accounts for circa 15% of Asia Pacific's regional revenue. We continue to adjust our offer in Asia Pacific, concentrating on where we have a differentiated outcomes versus the competition, and drive profitable growth. We are developing our industrial products offer, which grew 10%. We're taking market share. We're operating a more commercial proposition and strategy by concentrating our efforts on more profitable revenue opportunities, generating a strong margin and adding to our service solutions offer such as the acquisition of Domnick Hunter, last year. Across the group, price inflation at the group level continues to be low-double digits, but we are starting to see early signs of this easing. We are still delivering volume growth within our industrial product range, but volume declines within electronics reflect a more cyclical and slowing market. Our gross margin continues to benefit from margin optimization work, improved pricing and discount model. Cost inflationary pressures, especially within labor, have continued, but this has been largely offset by strong cost control and positive operating leverage. Meanwhile, we've continued to invest in our operating model to support the growth opportunities that we see. We are managing our inventory closely and increased our inventory turn from the 2.4x reported in the first half, as our purchases have concentrated on fast-turning product category, and customer level services. But I think some improvement in global supply chain lead time and our inventory availability has also improved. This, combined with enhanced customer support and delivery information led to an improvement in our Net Promoter Score across the group. We continue to remain very cash generative. So looking forward, given our performance and strong cost control year-to-date, we expect our full year adjusted profit before tax to be towards the top end of current consensus estimates for FY '23. We continue to be mindful of a more challenging backdrop and has contingency planning and cost mitigation in place with all markets ready to respond if necessary to protect our profits. Supply chain environment [indiscernible] of RS Group to really drive profitable market share. We have a team of passionate people with specialist expertise and a why-not mindset. We have a business that has benefited from significant investment over recent years, especially in operations, digital, product and service solutions and people. We've established a strong strategic vision which focuses on making our customers' lives easier. We're running a more commercial regional operating model, focusing on where we can add more value. We're providing innovative solutions with increased accountability and agility and most importantly, we have a purpose-led culture. We've proved this despite all the challenges in the last few years that we can outperform our industrial peers while still investing in our future. And additionally, we are continuing to look at ways to accelerate our growth through inorganic opportunities while maintaining our strong investment discipline. We're excited about the opportunity Risoul brings to drive stronger revenue growth within the Americas, especially given the move towards onshoring being seen within the region. Next month, our business in the Americas Allied becomes RS, providing even greater cohesion and consistent brand recognition across the group. We remain confident in the strength of our people and differentiated propositions to turn challenges into opportunities to drive further market share and generate stronger revenue and high-quality profitable growth. As an acting CEO, I will ensure we continue to look after the heart of RS Group, that's being our people and our purpose-led culture. With that, I'd like to hand you back to Adam and invite your questions. [Operator Instructions] Adam, back to you.

[Operator Instructions] Our first question today comes from Sylvia Barker of JPMorgan.

Just to confirm on the overall volumes, first of all. So you're saying the pricing is still low-double digits. Obviously saying low-single digits in industrial implies low double digits in electronics. So overall, that will be down slightly down low single digits for the group, if you can just confirm? Secondly, the U.K. and Ireland's electronics seems to have grown well in the quarter. Could you maybe give us an idea of that growth rate. And you're saying that the split of customers is different in the U.K. from the rest of the business within electronics, so you have more industrial-oriented. Could you give us any quantification of those splits perhaps for the U.K. versus other regions? And then finally, on China and what impact that has in Asia Pacific in the quarter and what you're seeing now?

Sure. So let me kick off and then I'll hand some of these over to our team. So in terms of volume, our overall volume growth was 8% for the quarter. We saw low double-digit price for the quarter. For Industrial, we saw 15% growth and again, low double digits. So again, real volume being delivered in industrial and we saw volume contraction in electronics at the group level. It does vary by region, but that's how it stacks at the group level. So Industrial, 77% of the group saw volume growth. Electronics, which is 23% of the group, saw some volume contraction. In terms of U.K. and Ireland, I'll hand over to Pete Malpas, who is our President of the EMEA region. But overall, I would just say, to start with it, our U.K. and Ireland business certainly did perform very well. It was ahead of the group average in the quarter in terms of their overall growth and their performance. But I'll let Pete just handle now in terms of how we've done it. Pete?

Good morning, David. Good morning, everybody. Yes, so thank you very much for the question. As David has highlighted, the U.K. and Ireland business has performed overall above the average and performed well. I think that's really due to the maturity of the strategy in the U.K. and Ireland. That's where we have the greatest maturity, particularly in our range of value-added solutions and areas that are really resonating with the customers. The question was specifically around electronics. I think it's fair to say that the electronic share within the U.K. and Ireland is one of the lower market shares in Electronics. But the Electronics offer in the U.K. and Ireland is much more aligned to our industrial MRO-type customer. So a little less on the semiconductors and passives, which are slightly more volatile but more aligned to the industrial products. And I think that's what's making the big difference for us in the U.K. and Ireland.

Thank you, Pete. And then finally, Sylvia, your question on China. Just remind you that China for us is 2% for the group, 15% for the region. It's been relatively tough going in China. So I'm just going to hand over to Sean Fredericks, our President for Asia-Pacific, who can give you a little bit of color on what's going on in China. Sean?

Yes. Thanks, David. Yes, so China for the quarter saw a contraction of 25%. Now it's for various factors. But December was the most impacted a 40% contraction. That was the peak of the COVID cases that we had, so we -- at one point, we had nearly 70% of our workforce COVID positive during the month of December, and that's tapering down now. Obviously, China reopening it's something positive to look forward to. However, we have Chinese New Year starting 21 of January and many companies have opted to take -- to start that holiday period a week or two early. So we're expecting January to be not many working days, but we are hoping for a bit of a bounce back come February. Now the 25% in China, pretty much all of that was on the electronics side, further impact as the electronics contraction was the chip export ban that was put in through the Biden administration, which realistically for the 6 weeks from start to where we are now, has almost shut down that industry. And then we were exposed in several big companies and customers with that. So yes, it's -- the COVID situation is by far the most impacted area for us. But we are hoping that the start easing out going into the last couple of months with the Q4.

Yes, just one -- Sylvia, just one final build on Asia-Pacific. Look, China is challenging, but we're still seeing good performances in Southeast Asia and Australia and New Zealand. Japan has got tougher comps but we're moving our businesses there into more industrial space. And Sean and the team are very much focused on the profitable customers more profitable customers and are still delivering double-digit operating margins within that part of the world. So overall, yes, it is challenging, but still a very important part of our proposition going forward.

The next question is from Rory McKenzie from UBS.

It's Rory here. Firstly, just a follow-up on pricing, which has, of course, been rising for 2 years. David, you commented just now that you think you're seeing signs of that peaking. So does that mean we should now expect pricing to start to decline sequentially? And can you also comment on the pricing trends in industrial and electronics separately? Secondly, the electronics volume declines of about minus 15% are pretty extreme given we don't typically think of you as being exposed to destocking cycles. Could you help us understand how to get there? You've obviously had losses of single-board computing. There's China, which has been the issue. So maybe can you help bridge out what the kind of underlying customer trends are versus anything else to be aware of? And then just lastly, could you share any early thoughts on your plans for FY '24? I guess you still got some pricing to annualize, but are you preparing the business and the cost base to see real revenue declines?

Great, Rory. So again, I'll kick off and hand a few of these over. So in terms of pricing, we haven't really seen any price contraction. The only exception to that would be a little bit around some of the electronic areas. But in the industrial side, we're still seeing price or cost increases flowing through. In terms of electronics, I think what we've seen is we've seen contraction in the Asia Pacific region, where 40%-or-so -- 35%, 40% of our business is a little bit more orientated towards electronics. And I'm going to hand over to Chris. He's going to provide you a little bit more color around the electronics. So Chris Beeson, could you answer the electronics question, please?

Sure. Thank you, David. As it relates to, I think, I believe both pricing trends as well as overall demand, I certainly -- we know the last 24 months has been a unique supply chain environment. And so our business participated in that equation. And if you recall, certainly from a pricing perspective, we made sure that we were aligned with the scarcity environment that we are involved in the scarcity environment and we participated in that. The -- we're seeing that slowing down and lead times are coming in, but nothing drastic at this point. As a matter of fact, as a general statement, we don't see massive pressures on the pricing equation at this point. And once again, I would say that we accelerated upward our pricing over the last couple of years, but we're watching that on a daily basis to make sure we're aligned with the trends and what the customer expectations are.

And increase from the volume perspective in electronics?

The volume -- anticipation of volume. There are -- you see a lot of different headlines and electronics is a very broad term as it relates to consumer in all the different market sectors. So you'll -- there's anticipation, and some companies will be negative 10% this year. Some are projecting growth of 5% to 10% upwards. So I believe that we'll see a positive growth, probably more modest versus the last couple of years, but 5% to 6% growth is probably an anticipated mindset for us and be aligned with the market.

Thanks. And Rory, I think just in terms of Q3, we've seen single board computing contract. We've seen Asia Pacific electronics contract and in particular, sort of Japan and China. We obviously don't have the board line in terms of the product offer in electronics, and we're also coming off of very strong comps in terms of 30-plus percent growth that we delivered over the course of the last 12 months. So that's really what's happening in electronics for us. With regards to FY '24, we do have plans in place in terms of various scenarios. Obviously, those scenarios range from strong growth to moderated growth to contracting and reduced growth at the top line. And we've got plans in place depending upon each of those scenarios, and how we will actually then drive and manage the business accordingly. At this point in time, there are certain levers that we have already pulled, but there's many other levers that we have yet to pull. And we are looking for opportunities in inverting the challenges into opportunities wherever we possibly can.

The next question is from David Brockton from Numis.

Two questions, please. Firstly, I just wondered if you can just touch on the exit rate by region? It feels like given the contraction you flagged in China in December, Asia Pacific would have been weaker as an exit rate. But just wondered if you could touch on that for the other regions as well? The second question, just in terms of acquisition pipeline, I appreciate you've just closed Risoul but any sort of update on opportunities in the pipeline? Are you still progressing opportunities? And could we expect anything in the near term in that regard?

Sure. So let me start with the exit rate. So December is always a tricky month because it's a short month, and it doesn't necessarily set a trend. So again, some degree of caution with regards to the performance in December. At the group level, the exit rate in the month of December was just a tad down from where we were for the quarter. If I look at the region, EMEA was pretty solid and strong throughout the quarter and the exit rate was not materially different. We saw a little bit of slowing in the Americas, and that was really off the back of some pretty extreme weather around the Christmas time. And then we did see some slowing in Asia Pacific, and that was largely, as we've called out before, China related. So again, I wouldn't sort of look at December as a setting a trend, and we remain confident as we see Q4 going forward, hence, sort of we're expecting full year profitability to be near the top end of the consensus range. In terms of the acquisition pipeline, I would simply say that it's strong, we're busy, and we are actively looking at various opportunities across the world, but our discipline remains incredibly robust as we look through those. Jane Titchener, Head of Corporate Development, is there anything you would like to add to that?

No, I'd just echo what you said. I think we've been really clear that our strategy is organic first, but M&A is still a really important part of our strategic journey. The pipeline is continuing to increase. And as you say, we are still quite busy. We are seeing some slowing of deals and maybe deals being paused or put off a while, but that doesn't mean that we've got no deals of at all and all deals are off and we're still looking at opportunities and working through those, reiterate what you said, retaining our discipline quality businesses with really good quality financial metrics are still incredibly attractive to us. And those will create value creation for us, and we'll continue to pursue those as appropriate.

Next question comes from Kean Marden from Jefferies.

Could we first of all start in the U.S. So could you just give us a bit of insight, please, into the expansion of your own label RS PRO offering there? It looks like you may have added another batch of lines in the December quarter. So just looking at basically about how you're looking to resource that and when we're going to start to see the revenue contribution from those categories starting to increase? Secondly, just your view on how the German distribution center would evolve and ramp over the next 12 months. And then thirdly, just looking at sort of peer reaction and strategy at the moment. Are you starting to see some other companies move into a sort of industrial automation and control area that may have been slightly more electronic focused in the past, which I presume is quite pertinent. If the electronics market is contracting at the moment, they may choose to seek growth in some other attractive adjacent categories?

Thanks, Kean. So Doug Moody, President or acting President for the Americas, can you take the first 1 on RS PRO, please?

Yes. Hello, this is Doug Moody. For RS PRO in the Americas, this is an area that we -- there's a couple of things that are happening there. First, we've added some resources into RS PRO, a leader that reports directly to me to get the focus working along with Jerry and the global team to really -- to drive that, but we've also increased our interface with our integrated supply business to offer that more to our customers. So I see a year ahead of growth in RS PRO overall just through -- just through a little more focus, a little more and we're also adding more lines in the Americas to our inventory that will make those products available right away. So taken all the actions we are seeing an uptick in that area, but it's starting from a fairly small base. The other aspect of that is we're changing our brands of Allied as David mentioned earlier, in early February to RS, which gives us an opportunity to really emphasize the RS PRO brand along with the branding change of the Americas and leverage that part of our offering overall.

Thank you, Doug. Jerry, just from a group perspective, is there anything you'd add in terms of the overall outperformance in terms of growth of RS PRO in the quarter?

Thank you, David. From our perspective, we continue to see strong growth across all 3 regions. And majority of the growth is driven through brand recognition, especially in EMEA and APAC as Doug has already alluded, as the brand shifts in the Americas over to RS, it gives us the great opportunity to drive RS PRO much harder in the American region. We are preparing ourselves to do so as we increase our stockholding in the Americas. At the same time, we are also working to drive a lot more brand equity work in the Americas to strengthen our position in the Americas. We do believe that as we move forward, we do need to increase our current stockholdings around 14,000 to around 40,000 in the future to really capitalize on the opportunities in the Americas.

Thanks, Jerry. And the German distribution center, Pete, anything you'd like to add -- answer that question around DC and utilization of it and ramp up?

Yes. By all means, David. So Kean, thank you for the question. The Bad Hersfeld expansion that has been ongoing now for the last 12, 18 months is really now starting to, if you like, I guess, some of the early teething problems that were more related to trying to expand a distribution center in the middle of the COVID crisis, which caused some challenges. We're now coming out of that, we're seeing increased efficiency and our order availability out of Bad Hersfeld and our on time to promise is improving significantly. And we're now starting that journey of moving some of the sourcing routes and increasing our stockholding capacity in the German facility. So we're starting to see the benefits, and we expect that to continue through Q4 and into the early part of next year. David, if you just want me to also make a comment on the peers moving into more industrial space? I think as mechatronics, if you like, is becoming more prevalent and electronics and particularly automation and controls are becoming more aligned, we are seeing some changes and dynamics in the marketplace where some of the traditional pure-play electronics peers are moving into the automation and control space. But that's not a new phenomenon. Certainly, over the last 3 to 4 years, we've seen that trend happening, and it continues to happen.

And Kean, just one, we are seeing certainly an increase in the number of products that we have within the Bad Hersfeld distribution center. It certainly increased by around -- just over 30% so far. So we'll continue to do that, but we're swapping products in and out of that. So it will take a little bit of time to ramp up, but otherwise, we'll then get the efficiencies and also have product closer to the customer base within Continental Europe.

[Operator Instructions] And our next question comes from Henry Carver from Peel Hunt.

Just a quick one for me on the market share gains and just any kind of data points or what you're measuring that against and whether it's in a customer acquisition or just outperforming a sort of underlying markets? And any sort of -- where is most pronounced and you way more scope for improvement? Is it basically where the -- where the initiatives are more mature as you were saying in U.K. and Ireland or -- any color around that further color would be great?

Sure. So look, I think in very simple terms, it's more pronounced in the industrial side of our business, the MRO industrial side of our business. We're seeing market share gains in that space in many of the markets in which we operate. Even in electronics, we would say that there are certainly product ranges where we are holding market share and maintaining our market share position. But equally, there are a couple of areas where we're probably losing a little bit of market share simply because we just don't have the breadth and all the range of products that others may have within the electronics space. If you look around the regions, I would say that the market share has been gained and captured in most countries. There are a call -- a few that we would call out probably not, but I think they're largely outside of our control, for example, China. So look, I think, generally speaking, Henry, we tend to look at supplier information and making sure that we're continuing to capture share of the channel. We look at industrial production output, we look at competitive landscape and we talk to our customers. The vast majority of our share gains in existing customers and share of their wallet.

Nothing further from the phone lines are present. So I'll now hand over to Lucy Sharma, VP, Investor Relations.

All right. We've got 2 questions coming in from the web. Taking the first one. They say, you've called out the digital campaign in the U.S. helping performance, what are you doing generally in digital across the group given our advantage versus the traditional peers?

So I'm going to hand back to Nick Young, who heads our digital innovation. Nicky?

Thank you, David. Yes, we're seeing over the last 12 months, specifically our continued outperformance from the strength of our digital offering in the market. As we know, many organizations have had to pivot towards more digitally orientated offerings. We continue to invest in driving more engaging with the right customers and optimizing our cost to serve for those customers. And that's really resonating and we're seeing from our recent studies that we're gaining market and gaining share of wallet with those customers. When we look at the future moving forward, we still see further opportunity to enhance our offering, supporting our Net Promoter Score and making sure that our on-site experience is fit for purpose. Some of the initiatives that we're looking to bring in there have already commenced, and we'll see some upside of those in financial year '24.

And the second question from the web was about our inventory levels, given the increase in the first half and tighter development in the second half, they're asking what's happening with our inventory going forward?

Our inventory levels have ticked down slightly, absolute inventory levels. Our inventory turns have moved up a tad from where we were in the first half. Our expectations for the full year is that we will see a year-on-year increase in overall inventory levels. As we said in the past, it's probably going to be around the GBP 50 million mark. And that really -- that increase is being driven, one, in terms of inflation and cost increases. But two, with the product expansions, in particular, in both Germany and also in the U.S. operations. So we are managing our inventory levels closely to ensure that we have the right inventory in the right location to serve our customers' needs based on the demand pattern today.

Thanks. That was it from the web. And back to you, Adam.

We have a follow-up from Rory McKenzie of UBS.

Just 1 last 1 for me, please. I appreciate it's a very recent change, and I'd like to add my regards and thanks to Lindsley. But could you just tell us anything about the Board's approach to succession and anything on the timetable?

So look, there is a process that's underway that the Board is leading. I think it's about finding the best available candidates from both internal and external. So it's an ongoing process. There isn't really a timeframe that I can provide -- an indication that I can provide at this point in time. But I'm sure when the Board has something to say, the Board will certainly inform the market accordingly. But it's an ongoing process, it's an active process.

Sorry, Adam, can I just say, we have another question from the web asking why is the vast majority of market share gains coming from existing customers? Why not winning new business?

So I will start, and then maybe I'll hand over to Pete, who might wish to add some comments. So look, we are focused on both existing customers and also new customers. But certainly, there is a great -- there's opportunity in both. But certainly, an existing customer is a customer that we already know and a customer that knows us. And in many instances, we're not their sole source supplier or provider of indirect spend activities. And so for us, as we broaden out the range, we make them more aware of what we have to offer and we utilize our services and solutions within their proposition, it certainly is something that we're very much targeted on to actually drive share of wallet of existing customers and then complement that with growing new customers, targeted new customers where there's actually an opportunity to make money. Pete, would you like to add anything further?

Yes. Yes, I will, David. And just to say, to reiterate David's point, both existing and new customers are very much on the radar and some of the stuff that Nicky just alluded to around some of our digital journey is all about attracting new customers. I think it's just pertinent to say at the moment that we're seeing a deliberate focus in the change of strategy in some respects around some of our low-value, onetime, high-cost-to-serve customers that particularly came to us during the pandemic, where we are definitely, if you like, moving away from that customer base and trying to focus much more on those customers that have got a lower cost to serve and a higher customer lifetime value, where we can grow that bigger share of wallet. So -- therefore, that's why the overall customer numbers, the dynamic is changing a little bit. But moving forward, very much new customer acquisition and growth from existing customers are both an integral part of the strategy.

Thank you, Pete.

No questions.

Okay. Well, can I just kind of thank you all for joining the call this morning. We look forward to updating you as we continue to progress through Q4 and our full year FY '23. So thank you for your time this morning, and good morning.