SigmaRoc plc (SRC) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen and welcome to the SigmaRoc presentation on the 2023 results, the transformational acquisition of the lime and limestone assets from CRH and prospects. Before we begin, we would like to submit the following poll, which you will see on your screens. [Operator Instructions] The company may not be in a position to answer every question it receives today. However, the company will review all questions submitted and publish responses where appropriate. These will be available via your Investor Meet Company dashboard. Finally, we would like to remind you that this presentation is being recorded. I would now like to hand you over to Chairman, David Barrett; Chief Executive, Max Vermorken; and Chief Financial Officer, Garth Palmer.

Thank you very much. Welcome, everyone, to this Investor Meet Company presentation of our 2023 results. The agenda for today is on the screen. I will give you a brief overview of some of the very exciting progress we've made across 2023, inclusive of the operational review. At that point, I'll hand you over to Garth on my right, who will take you through the financials of the business. I'll return with some views on strategy, capital allocation and the outlook for the group before we turn to Q&A. It should only take about 30 minutes in terms of slides and then we'll have plenty of time for questions. In terms of overview, 2023 was probably the busiest year we've had in our history since founding the business in 2016. It's a enormous evolution on 3 fronts: Financial, strategic but also ESG and sustainability in the group. When we look at the financial evolution, a number of points to make on the slides here. Revenue, EBITDA and EPS, all moved ahead quite considerably and ahead of consensus. We did this back -- in the market backdrop, which was in some markets challenging with 4% like-for-like volume drops, which was actually quite good given some of the industries we are exposed. Our EBITDA has grown in terms of margin to 20%, which is quite pleasing. It's our long-term target. It's also what we aspire to be ahead of in the future. Our cash flow was robust with free -- underlying free cash flow and I see in line with our expectations, helping us the degear to 1.657x, so below 1.6x and that was helped by some noncore asset divestments to the tune of about GBP 8 million. When you turn to strategic side of things, we have done the largest deal we've ever done with the CRH transaction. And that in many ways allows us to say that we have now written Chapter 1 of the story of this company and are starting to write Chapter 2, which is the chapter where we are a leading lime and limestone operator across a very compact footprint around the North Sea and the Baltic Sea with fantastic assets in most of these countries and as the second largest operator in lime and limestone in Europe. We also did a number of bolt-on transactions at the start of the year. At the start of the year, the general climate was fairly gloomy but we decided to get on the front foot strategically and add a number of businesses into our setup, which turned out to be very good acquisitions, as you can see later on in the slide deck. We continue to innovate. We have our first CO2 capture system with Aqualung setup in Sweden. It captures CO2, 10,000 tonne a year. It's the largest of such facilities operating, I believe, across Europe. We've obviously substituted some biofuels. We've invested in our green concrete solution with Greenbloc and Mevo. When we turn to a few of those sorts of points from a financial and ESG perspective in more financially -- and numbers, we can see the following: GBP 580 million in turnover, GBP 117 million in EBITDA, 8.12p in EPS. Very satisfying with the said numbers to see. 20% EBITDA margin, leverage at 1.57x, return on invested capital, near 11%. That's good. It's on a trajectory towards 15%. Looking at the next set of numbers, these are ESG focused. And here, we've managed to make a number -- a lot of progress again. Emissions intensity, 29% down. Energy intensity, 12% down year-on-year, alternative sources of electric power, 71% across the group. Alternate fuel use, our first -- one of our kilns ran 100% on biofuels across a full week. That kiln was not designed for biofuels and yet it still did it without modifications. This is very good because it shows that we can progress along this line. When it comes to safety, now 31% reduction year-on-year in serious harm injury frequency rate and that was achieved by 172 site audits. These are full day audits where safety team goes in, reviews documentation, reviews operational reality. Very, very good results across all around. When we put a bit more context to this from an operational perspective, very nice picture there of our German site. The group, as it currently looks, is 3 regions that will expand to 5 as the full spectrum of the CRH deal comes through. Garth will give you few details on that later on. On the left, you'll see our product mix by revenue and our end markets has been of context. When we look at the operating regions we currently have or we had in the group in '23, 3 in total, the Northwest first, that is the British Isles, 3 platforms, the precast group, England and Wales quarries and integrated businesses there and then the Channel Islands. This is 1 of the 3 regions which has a considerable construction exposure and also residential. Some concerns were voiced by shareholders early in '22. How will you fare when residential construction comes under pressure? Well, this is a slide that gives you the answer to that. We will fare rather well actually. We have an increase of EBITDA of 5% year-on-year to GBP 31 million, nearly GBP 32 million. The reason this -- just -- these platforms did so well is a laser focus on how these businesses are run, exposing them more to infrastructure, preparing the products from more infrastructure use, making sure that our teams are competent to sell into that, have sales teams in the right place. That's particularly the case for the precast products, PPG business, which is a fantastic collection of precast and precast concrete assets right across the U.K. When it comes to the quarry businesses in England and in South Wales, again, very pleasing results, positive here because of larger infrastructure contracts we were able to supply into. Obviously, some difficulty when it comes to residential construction because they were -- that was a market which was slightly less buoyant or a lot less buoyant but we recovered that with a better exposure to infrastructure and also industrial build. We've started the construction in -- of a new asphalt plant in South Wales. There's some nice images in the annual report where you can see the progress of that plant, which will come on stream in a few weeks' time. All in all, very good performance in spite of some headwinds here. Second platform is the West, which is basically the Benelux, 2 setups there, the dimensional stone business and then the Benelux business in aggregates and concrete operation. The dimensional stone business did very well. We improved its operating logic. We sold the product further afield into Italy, more into Germany, more into other markets and into United States. For example, we are using more of the material we extract. We have a new product there called Puccini Blue, which was effectively a waste product because it had [indiscernible] in it and we were able to recycle that into a very high value return. The Benelux platform, Concrete and Aggregates, delivered well. Again, headwinds here, when it comes to real estate, construction but we expose more to infrastructure, specifically in Northeast Belgium, where we have the concrete businesses and along the canals, along the river [indiscernible], along the river shores where large infrastructure projects have been built. Good progress from EBITDA perspective, good progress on margins, as you can see on the right-hand side. When we go to the Northeast, this is the Nordkalk set up and a much more diverse end market, if you look at the pie chart on the right-hand side. And that's helped that business through some of the challenging times when it comes to residential construction. Paper and pulp had destocking effect across the first half of the year, metals and mining did well, food, chemistry, environment did well also. As a result of that, increase of EBITDA year-on-year 16% to over EUR 80 million, margin recovery to over -- well over 20% EBITDA, further savings that were generated by a more regionalized management structure with very high-level, high-quality managers in situ now. Very pleased with the results here. So that completes very brief review of the operations. I'll now hand you to Garth for finances.

Thank you, Max. Good afternoon, everyone. Very pleased to report another strong year financially for the group. While we also managed to continue to invest in growth and also transition into a leading European lime and limestone producer, we're reporting revenue of GBP 580 million, for the year. That's a improvement of 2% like-for-like and that's in spite of a 4% like-for-like volume decline. EBITDA of GBP 117 million, is an improvement of 10% like-for-like and 15% year-on-year. That's a function of acquisitions through the year and operational improvement initiatives and some margin improvement. And then earnings per share of 8.12p, an improvement of 1% year-on-year. And that's in spite of finance costs increasing by nearly 60% and also the dilutionary impact of the fund raise in February, where we didn't fully deploy the capital from that until Q4 with the acquisition of Beton. We also then managed to reduce leverage from -- down to 1.57x from 1.93x at the start of the year, 19% reduction. And we also had very strong free cash -- free cash flow of GBP 47 million underlying -- cash conversion ratio of 40% that did -- that is less than what we generated last year, which is a function of the higher interest costs and some working capital absorption as part of the growth in the group. Moving on to revenue evolution year-on-year. So we increased 8% from GBP 538 million to GBP 580 million. 1% of that was from organic growth, primarily other than Northeast. And then 5% from M&A, which is a combination of Retaining that was acquired in the Northwest, Goijens and Beton in the West, Björka, Juuan Dolomitik and ST Investicija in the Northeast. And then looking at EBITDA on the same basis, we went from GBP 102 million to GBP 117 million, 15% year-on-year increase. 8% of that is organic growth. Primarily, as we sort of touched on before, pricing power and margin expansion and primarily operational improvements, particularly in the Northeast, with management restructure, translating to GBP 3 million of recurring savings there. And then also 6% from M&A through the acquisition pipeline and also full year contributions of businesses we acquired in '22. So overall, really strong improvement year-on-year across the group with an focus on operation control and integrating the acquisitions. The full income statement, we sort of touched on this includes D&A and cost of sales. Underlying profit from operations of GBP 84 million versus GBP 70 million in the year prior. Net finance costs increased by GBP 5 million, up to GBP 14 million. That's a function of full year of the base rate hikes from '22 and translating into a cost of debt of a bit over 6%. Other gains is the share of earnings from associates and some hedging benefits and then tax expense of GBP 12 million, is up GBP 3 million year-on-year, represents about [ 70% ] of profit before tax ratio, which is up from 40% the year prior and it was expected as we've used up the carryforward losses from some of the acquired businesses in the U.K. GBP 3 million of profit was attributable to noncontrolling interests, giving us a profit attributed to owners of GBP 56 million. That's up GBP 5 million from the year prior, translating into an earnings per share of 8.12p. And then on the right here, we just have a breakdown of cost of sales as a percentage of revenue, you should see the evolution year-on-year. It's fairly consistent, slight shift from energy into materials and production. And that, that cost base is very much dynamic. It scales with production. So if we don't produce, we don't incur approximately 70% of our cost base, giving us a lot of resilience through a difficult trading environment. Moving on, so shifting from EBITDA through to free cash flow evolution, GBP 117 million underlying EBITDA translated into underlying free cash flow of GBP 47 million at 40% conversion ratio. We had a GBP 23 million underlying drawdown in working capital. That's after we added back GBP 20 million of payables outstanding at year-end in relation to M&A, primarily the CRH lime acquisitions. And there was also GBP 3 million of working capital impact, which was a function of purchase price adjustments that worked their way through payables. So taxes from pre-acquisition periods, et cetera. Income tax paid was consistent year-on-year at GBP 11 million and net CapEx of GBP 22 million translates to about 72% of D&A ratio, includes GBP 6 million of noncore divestments and then adds back about GBP 9 million of growth investments, GBP 6 million of which is supply fuel conversions, carbon capture, the asphalt plant -- wash plant and then 5 of life of mine extensions, which we detail on the next slide. And then finance costs of GBP 30 million paid, cost of debt of, as I said over 6%, translating that free cash flow of GBP 47 million. And from there, we then take from net -- our net debt evolution for the year, starting at GBP 194 million, GBP 47 million of underlying free cash flow, which is detailed. We raised GBP 30 million in February, GBP 29.2 million, net of costs. We then deployed that across the year, spending a net amount on M&A of GBP 32 million. That includes GBP 2 million in -- of divestments from one of the acquired businesses and also includes GBP 3 million for the Beton asset acquisitions, which actually goes through our cash flow as plant and equipment acquisitions and intangibles. And then organic investments of GBP 11 million, as previously detailed and nonunderlying cash costs of GBP 12.5 million, GBP 12.6 million. Primarily, that's M&A related. Obviously, the 6 acquisitions through the year plus the CRH deal, which we completed on the fourth of January. So a lot of those costs were accrued and some were cash paid. And then there's a portion of that is also restructuring. And then lastly, GBP 9 million of other includes dividends to noncontrolling interests, some minority investments. The investment in Mevo, for example, some derivative adjustments and predominantly ForEx on borrowings, translation of debt, which is mostly euro. And that gives us GBP 182 million of net debt and at a leverage ratio of 1.57x. On the next slide, we have an overview over the last 5 years of how we performed on some of the key metrics, revenue and earnings, which we've managed to increase every year while maintaining prudent leverage and we've done that through some fairly challenging operating conditions, COVID and the inflationary period in '22. Taking that a step further, we have sort of evolution of the group, what we've acquired in the dark blue bars, EBITDA acquired at the respective acquisitions at various stages in the group's evolution versus the incremental -- well and then the blue bar is their incremental performance based on FY '23. So in the first group, we have just Ronez, which we acquired start of 2017 at a 9x multiple. Almost 60% of EBITDA uplift that's now at an effective multiple of 5.6x. We then take Ronez all the way through to B-Mix, which is the last business we acquired before we acquired Nordkalk in 2021, which is the middle 2 chart -- bars. So those businesses collectively at 6.9x acquisition multiple, 57% uplift in EBITDA performance in '23, giving a 4.4x effective. And then the entire group, including everything we acquired in '23, now the -- preceding the CRH lime acquisitions, 6.7x acquired multiple and trading at 5.3x based on a 29% EBITDA uplift. Taking that a step further, this slide is anonymized data across all the 18 acquisitions, where we've invested a total of GBP 680 million, of which GBP 400 million was new equity. Again, this includes acquisitions in '23, those are shaded in the light blue. And average return -- EBIT return on the investment of 14%, which is very encouraging, targeting over 15% and I think that's very much achievable. And we'll continue to -- once we've degeared continue our investment strategy, identifying businesses with product, reserve, geography, market and customer fit. And then lastly, just rounding out on the back of these results, sort of investment case, we've improved on every key metric that we focused on. Operational improvements that led to EBITDA increase up to GBP 117 million, 10% like-for-like and EBITDA margins over 20%. We've also increased EPS despite higher finance costs and also the dilution from the fund raise in February. We've improved ROIC from 10% to 11%, even while deploying capital through the year. And we also then managed to reduce leverage despite those investments down to 1.57x. So then to conclude, just a slight forward look, structurally, obviously off the back of the acquisition of the CRH lime, the deal one in the first week of January. The group will be structured around 5 regions, 3 core end-markets and 3 products. From an end-markets perspective, will be just under 50% construction, across the enlarged footprint. 37% industry and the balance 15% environment. In terms of products, we'll be over 55% lime, 30% stone and then the balance, 15% value-added products. And then that will cut across 5 regions, will maintain the Northwest and the West, Northeast will be separated to 2 and then we'll add in the new Central region, which is Germany and Czech. We feel that this structure will enable us to manage the enlarged footprint effectively but we'll also retain our agile structure, keep this nimble. So that concludes the financial review. I'll hand you back to Max for strategy and outlook.

Thank you, Garth. Thank you very much. So a few slides on strategy, capital allocation outlook. First and foremost, the year was busy. We did a large number of different things, inclusive a transformational transaction with CRH, 6 bolt-on acquisitions, we spent about GBP 32 million on those, adding another GBP 10 million EBITDA. Organic initiatives, some of which Garth already mentioned, to extend mine life, quarry life in some of the key operations. And we divested a few assets already in '23 and there's more to come on that in '24, '25. The main event, obviously, within that list of initiatives is the CRH transaction, which creates with our group, the #2 operator from a size perspective in lime, in industrial limestone and construction milestone right across Northern Europe. It's a fantastic transaction. It strengthens our position and it really makes -- transforms our business and a focused #1 or #2 operator in some very attractive markets. On top of that, there's potential synergies. We talked about EUR 30 million or so, at the very least and potentially for up to EUR 60 million in EBITDA synergies to be delivered by 27 months they have been fully integrated. The markets we're operating in are quite attractive markets and they will help us get to a ROIC, return on invested capital of 15%, already at 11%. But even without that -- passing of time, we are already double-digit announcing with this transaction, once fully integrated and a full year of ownership. And that is a quite satisfying, always a condition for us when we invest. And post all of this, it's a great platform for compounding growth as the business continues as a lime and limestone operator. And what's important to know and why we're so excited about lime and limestone is effectively this slide. Our group is a -- from a historic perspective, from an equity historic perspective, a very simple business. We have 1 core mineral, calcium carbonate, which is the base of limestone. It creates 2 core products: quicklime and limestone in various forms and that will be sold into 3 core segments: industrial, construction and environment. And in these 3 segments, you'll find countless applications. And to give you an illustration of that, these are some of the materials that in -- where we sell lime or limestone into and that need limestone to be produced. They're essential for modern life. They need lime. They need limestone. And this list will get longer as we transit from a fuel heavy economy to a more sustainable economy. What it looks like from an operating perspective, the map in blue on the right, which assumes, obviously, the Polish and U.K. assets having come in completely within the group, they -- the assets -- the dots are the main operating plants across that region. We're #1 and #2 supplier in each of these markets. Industry segments I highlighted with 3 product types, lime, stone and then value-added products for [ EUR 1 billion ] in turnover overall. These markets have quite a good outlook. The 3 main segments and then the submarkets in there, steel generally robust and has been a good market for us over the past year -- 2 year. Paper and pulp had a recovery in 2023, the second part of '23 after some overstocking in the first half, started well in the first few months of '24. Chemicals, slightly softer start in some areas but generally speaking, an okay outlook and mining remains stable. That's 31% of our revenue in '23 and a larger proportion of '24. Construction and Engineering splits down into infrastructure and residential work. Infrastructure has seen a good pipeline in relation to projects that were launched during COVID, projects that were launched subsequently in inflationary period and to deal with the energy infrastructure but also residential and these have to be looked at because that has had a tough time. As long as the interest rates, we believe don't come down, we will see tougher trading in the residential market. That said, we feel we're now close to the bottom of this and any turnaround will lead to additional volumes for us, which is fantastic because that will be coming in and help our trading. The last segment is Food and Environment. Here, this is cleaning of water, cleaning of fuel gas, the supply to the food industry to make sugar and feed for animals, feed for chicken and so on. This is a segment which has a little bit of its own dynamic for various reasons. For example, if there's a lot of wind power -- a lot of wind in the system -- lot of wind power, you burn less gas and coal and therefore, you treat less flue gas as a result. Good markets, generally speaking, because there's a lot more needed of this product and therefore, the outlook remains good as well. Medium term, robust outlook with a lot of diverse end markets. To give you a further illustration overall, a challenging backdrop in construction -- residential construction, a graph here. These are our markets, the markets we operate in and sell into, residential construction, nonresidential construction and then civil engineering, which is primarily infrastructure jobs. The middle bar there, with the dotted line around it, is the evolution in '23 for the 3 sectors. And you see that the negative movement in residential building is quite dramatic. We'll see a uptick in that, we hope, in '24 but still quite a negative outlook there and then '25 and '26 that turns around. And so mid-term better or good outlook for residential construction and quite an explanation here in terms of how trading has been this year. When we turn to the last page before an outlook, a subject that a lot of people are quite interested in is synergies and the delivery of synergies. And so to give you a bit of guidance on that, this slide. On the left, you see a bar chart which sells you have EUR 30 million to EUR 60 million in total synergies. That was the outside in look when we bought CRH assets, which is a look that we -- based on lot of due diligence and our analysis, thought we could generate. We've now have had 3 of the 5 businesses for a bit less than 2.5 months. And out of that -- in that -- during that period, we have progressed very well with the identification of the potential synergies that we can build in. We're confident just on the footprint we currently own, that we are able to identify and subsequently build into our P&L, EUR 33 million worth of synergies. So that's ahead of our total estimate for the entire perimeter. We don't own 2 of the 5 countries as of yet. We started to build in these synergies already and we are at this point in time tracking the EUR 2 million already being built in for the year 2024. That number should grow as we progress across the year. Deal 2 and deal 3, the U.K. and Poland will then bring in further EBITDA and therefore, further potential to look at synergies. And we hope that as those come through, we will get to that EUR 60 million number rather than just the EUR 30 million, as we identify synergies and build those in -- across time. So generally speaking, a very positive outlook and a very good place to be so short into the new journey. We summarize all this in 2 slides: one, driving shareholder value and another one outlook and summary for the year. While driving shareholder boils down to these 8 points, we're #1 or #2 European lime supplier -- limestone supplier, which is a market which is excellent to be exposed to with both growth out of recovery for building and hopefully also structural growth for new applications in those markets. The asset backing of the group is very strong, 2.7 billion tonnes of mineral right across our spectrum. And we have gathered that set of assets through a whole series of very attractive M&A work and organic work. 18 deals with a low multiple -- low leverage multiple and that has allowed us to increase our EPS eightfold over the time that we have been running, since the founding in [ 2016 ]. Our EBITDA increase, therefore, currently stands at 29% improvement for all those assets we bought, with some assets having done a lot more than that even in our history. We target a zero harm business. We have an incredible focus on that. It's a story which -- and a focus which will never end because every day, we need to focus on safety. We have a good team which we're increasing in terms of capabilities to deal with that and we invest in innovation. We invest in ESG and helped even at our smaller scale, relatively comparing to some of the biggest groups in the world, we think we've punched far above our weight. That translates into the guidance metrics you see on the right of that slide, which gives you some targets when it comes to top line growth, EBITDA growth, cash conversion and so on. Looking there for now at the summary and an outlook for the business. The year started well. We had quite heavy snowfall in various parts of our operations, which meant that the start of Christmas was, in some cases, delayed because there was so much snow, we couldn't even get going. That said, we recovered the lost time right across the back end of January and into February, we're trending nicely and in line with our own expectations. The backdrop in '23 will be fairly similar to the backdrop -- sorry, '24 will be similar to the backdrop in '23. Subdued demand in residential construction, decent pipeline of infrastructure work, better demand in industrial and environmental application. And therefore, overall, we hope, a good year ahead again. The integration of the businesses we bought is going well. EBITDA synergies we identified, EUR 33 million already and that number should keep going up. We've exercised the U.K. call option. So that business will come into the group very soon and then we'll start work on the last piece of the CRH puzzle, which is the Polish assets. A positive start of '23, as well as '24, integration well underway, acquisition is progressing well. So all in all, a great year '23 and plenty to look forward to in '24.

Super. Great. Well, thank you, David, Max and Garth. If we could turn to the questions, maybe start with you, Max but Robert asks, how successful has Greenbloc been to date?

Greenbloc win has been a fantastic success. And to give you the illustration for that, the PPG Group, which is a collection of precast operators that we bought and built into 1 really fantastic business in the U.K., that business was the inventor and the pioneer behind Greenbloc. It's transition from selling mostly residential work to doing most of the infrastructure and larger scale buildings is in a large part, thanks to our pioneering view on greener concrete and therefore, Greenbloc. If you look at the infrastructure work we supply, a lot of that is out of Greenbloc mix. If you look at the residential work we supply, nearly half of that is currently a variety of Greenbloc mix. So that product has been fantastically successful from that perspective. When you look at margins and you have seen on the slides that the margins of the PPG, the Northwest set are actually very solid. That's also in relation to what the PPG business has allowed to do for us. And that, again, is Greenbloc and its innovative aspect. So very successful.

All right. Thank you. One for you, Garth. A jump from 1.95p statutory earnings per share to 8.12p underlying earnings per share seems big. Do you have any further comments or clarification for the adjustments made?

Yes. This is detailed in the financial statements. So there's a full reconciliation there. But fundamentally, about [ EUR 42 million ] of nonunderlying costs in the year. Now a big portion of that is due to the CRH lime acquisitions, just given the timing of it. We had line of sight that, that first deal completed, obviously, post year-end, so therefore, we had to accrue those costs at 31 December. Our total M&A portion of that is about [ EUR 26 million ] and approximately [ EUR 20 million ] of that relates to the CRH lime business. So that obviously has a big impact. It's EUR 1 billion deal, as a percentage of that, those costs aren't outrageous. There's a further [ EUR 3.5 million, EUR 4 million ] of restructuring costs, which are one-offs absolutely nonrecurring and translate into future earnings growth. And then the balance is noncash. So share option adjustments and the like, amortization of finance costs. So that -- there'll still be -- there'll be a bit larger number in '24, not larger than that but it will be a reasonable number in '24 and then that will drop off significantly in '25 once we fully integrate the business and complete the other 2 deals.

Great. Okay. Just on the topic of deal costs, et cetera. Mark asked, will there be material CRH related acquisition expenses in '24? Or have they all been accrued in '23?

Mostly accrued but there is not everything -- not everything was incurred and therefore accrued, so -- and there are costs associated with deals 2 and 3, as I sort of touched on.

Yes. Super, okay. And Michael asked, do you see further small divestments as you complete the CRH acquisitions, which would help to deleverage your position?

You want me to take that?

Yes.

Yes, is the answer. We're looking -- we have got a portfolio of assets across Europe. There's assets in there that make sense to own and there was assets that are perhaps better owned by someone else. But we shouldn't forget [Technical Difficulty] we built, as you can see some of the slides across the -- that we presented as a group, we've built as a group of assets that we really wanted to own when we bought them. So if we sell anything, we have to sell it -- we will sell it only if the price is right because none of these assets are either underperforming or nonperforming or assets that we wouldn't own anyway because of the cash flow and the potential that they bring for further earnings growth. So yes is the answer to your question and with the caveat that the price needs to be the right price.

Kevin said -- us -- you said you'd be #2 supplier of lime in Europe, which are numbers 1 and 3. But I think you said 1 and 2 in a number of those markets. So this is a competition question really.

Yes. So the -- so we are the #2 when it comes to total volume. In some markets, we're the #1, in some other markets we're #2. The overall large supplier in Europe and also in the world is a business called Lhoist, it's spelled L-H-O-I-S-T. It's a Belgium business. It's a privately held business. It's got a fantastic history of 150 years. It was founded in Belgium and has grown from there right across the world. And the second business is also Belgium, an independent and that's from a volume perspective, #3 now in Europe but again, the #2 worldwide is a business called Carmeuse, like Lhoist, a fantastic business [indiscernible] founded in Belgium, has grown over the last century right across the world by expanding its lime -- in lime footprint. And we are sitting in between those 2 in Europe, as the #2 when it comes to volume. So we're in good company when it comes to lime operators, fantastic businesses with enormous skill.

Super. [indiscernible] asks what is the operating leverage potential in the business?

Talking about debt leverage? Or are we talking operational?

I suspect it's a question in terms of operational gearing.

Yes. Well, gross profit is about 30% this year uptick. Haven't looked into it exactly but it has to be 35%, heading towards 40%, I would have thought in terms of drop through, if that's the question.

Yes. Super. All right. We haven't got anything else in the queue. I wonder Max whether you'd just like to summarize very quickly. I know we had a question earlier on in terms of cyclicality of lime and limestone, which you had a very interesting answer on. I wonder whether might just like to summarize before we close.

Yes, I can summarize that. So actually, the slide you see on the screen, the Q&A and the various boxes of the various applications we've got, there's a good slide to illustrate this. As soon as you deal with anything industrial, you have cycles, I guess that's just what it is. Some materials are high sought after at some point in the cycle. Others are high sought after later in the cycle. The fun thing about limestone and about quicklime is that it's exposed and required in so many different applications and products that we have so many cycles going on at the same time that out of that, we have a lot of steadiness. And you can see that in the history of the operations that we already own and that we've now currently bought. Sometimes we've shown you graphs all the way back to 2008. It's very steady evolution. So lots of different cycles, construction can be up 1 day, still can be down 1 day but it usually doesn't happen all at the same time. That gives a real steadiness to this business. And that is a real attraction. The predictability, the steadiness, the reliability of the earnings of a lime and limestone acquisition business. And then secondly, it's a fantastic industry to be involved in. It's quite nice to know that hundreds of different of applications that make our life both modern in cities but also rural when it comes to agriculture possible, is because we extract limestone, transform that in a product can be used. And so anything that you touch on a daily basis, whether you're sitting in an office or working in the garden or wherever you are, will have limestone in it somewhere. And to be part of such an industry, is just quite rewarding.

So that's an excellent summary. Thank you, David, Max, Garth. Could I ask investors not to close this session as you will be automatically directed for the opportunity to provide feedback. If anyone has further questions or would like additional information on SigmaRoc, please do get in contact via [email protected]. Many thanks for attending today's presentation.

Thank you very much.

Thank you.