Smiths News plc (SNWS) Earnings Call Transcript & Summary

Good morning and welcome to this presentation of Smiths News plc's preliminary results. The format today will be familiar. After giving a brief review of the headline performance, Tony Grace, our Chief Financial Officer, will take us through the financial results in detail. I will then review our commercial and strategic progress and set out the priorities for the business in the coming year. Tony and I will take questions at the end of the presentation. So, turning to the headlines. There are 3 key themes that I would suggest define the progress we have made over the last 12 months. Beginning with our financial performance, which I'm pleased to say, was ahead of the expectations that were revised following the COVID-19 pandemic. In what has been exceptional circumstances, we've delivered a remarkably robust result because of 4 key factors. Firstly, the resilience of both our business model and our core markets through one of the most disruptive trading periods in our history. Secondly, the flexibility we showed and the grip we maintained on cost and service, which together have substantially mitigated the reductions in sales values. And thirdly, the swift action we took to limit losses in our ancillary businesses, ensuring they were not and continue not to be a drag on performance. And fourthly, our robust final quarter, which saw sales recovering more than we had anticipated, giving us momentum into the current year. Collectively, these factors have delivered a performance, though not as we would have wished at the start of February, was significantly ahead of what might been predicted at the end of March. Our business has been stress tested like never before and yet we still delivered an EBITDA of over GBP 39 million as well as successfully addressing the underlying strategic objectives that are integral to our revised strategy. The second defining feature was the delivery of those stated strategic objectives despite all of the pressures on the business. This included the strategic review and sale of Tuffnells, which was completely despite the distractions of the pandemic and lockdown. The subsequent resizing of our central functions has proceeded at pace and will give us a material benefit in the next year. The completion of our publisher contract renewals, which opens the way to further network and supply chain efficiencies. And then lastly, the renewal of our banking facilities, which underpin our liquidity aligned to our capital management plans as we look to deliver improvements in shareholder value. And it is clarity on that particular strategy, which is a third defining feature of our year, freeze from the drag of profits and cash of Tuffnells, we were focused on our leadership in newspaper and magazine wholesaling. The simplicity of our purpose aligns to our cash generative capital-light business model and our stated priority of materially strengthening the Company's balance sheet. It is also, and I believe importantly, a strategy based on stretching but realistic and achievable goals, and I will shed more light on these later in the presentation. But for now, I'd like to hand over to Tony to take you through the numbers.

Thank you, Jonathan. This financial year has spanned a number of significant events. Most notably, the strategic decision to dispose of Tuffnells, which was concluded in May 2020, and our response to the impact of COVID-19 in the second half of the financial year. From a financial perspective, the disposal of Tuffnells has resulted and its financial performance being reported as discontinued operations. This slide, therefore, reflects a restatement of FY '19 of the continued operations to provide a clearer view of year-on-year performance. I will now look at the continuing results in a bit more detail. Total revenue declined 10.7% over the full year, reflecting both the underlying structural decline in newspapers and magazines and the impact of the strict lockdown in March to May, and the gradual recovery since then. To get full understanding of the overall decline, it is best to view the year in 2 halves. In H1, revenue declined by 4.5%, within our strategic forecast of minus 3% to minus 5%, and in line with long-term trends. In H2, revenue fell 16.9% due to the lockdown and other government restrictions on mobility imposed in relation to the COVID-19 pandemic. The initial strict lockdown during our third quarter resulted at its peak in the temporary closure of over 2,000 of the retail outlets we serve. Over the weeks which followed, consumer purchasing of newspapers and magazines saw a switch to the smaller, more local retail outlets that we serve. And indeed, so much so that by August overall sales volumes though still down on pre-COVID-19 levels, had materially improved from the shock of the initial weeks of the lockdown. Jonathan will cover sales and markets in more detail later in the presentation. As a business, we delivered an adjusted EBITDA, excluding IFRS 16 lease accounting of GBP 39.1 million, GBP 9.7 million down on last year. Although disappointing compared with what we had expected at the beginning of the year, it has been a resilient performance in a very challenging environment. The decrease in EBITDA was a consequence of 2 distinct sets of factors. The impact to underlying profitability throughout the year and the COVID-19 impact in the second half of the year. The underlying impacts in the year adjusted EBITDA by GBP 2.6 million. The primary elements where the Smiths News operational efficiency program generated GBP 6.7 million of savings in the year from the labor and the distribution cost base and more than mitigated the margin impact of the core structural decline in sales of newspapers and magazines. Savings were generating from trunking optimization, final mile route reductions and hub consolidation programs. Improved publisher terms continued to offset operational cost inflation. Central cost overheads were reduced by GBP3.5 million through the continuation of cost saving initiatives, implementation of the shared service model, and rationalization of back office costs, following the disposal of Tuffnells in May 2020. Reduction in waste paper rates by 50% compared to the prior year resulted in GBP 1.8 million less margin. A national discount retailer removed the newspaper and magazine category earlier in the year from its stores impacting margin by GBP 2.2 million. DMD adjusted operating profits fell by GBP 0.9 million in the period, following the loss of the British Airways contract in June 2019. The impact of COVID-19 on profits in H2 was to reduce adjusted EBITDA, excluding IFRS 16, by a further GBP 7.1 million. The sharp fall in H2 2020 revenue and margin from COVID-19 was the single largest negative event in the year with a combined impact of GBP 7.5 million on profits. Smiths News margins were impacted by approximately GBP 5 million, DMD by GBP 2 million, and other businesses by around GBP 0.5 million. The reduced profits were partially offset by our COVID-19 cost responsible program, which generated incremental savings of more than GBP 1 million by rapidly flexing the contracted cost base for lower volumes and making changes to final mile delivery routes. The Company followed approximately 550 colleagues mainly in DMD and in-store between March and July during the high of the national lockdown and received GBP 1.3 million furlough subsidy from the government towards employment costs of these colleagues. Operating profit, including IFRS 16, but excluding adjusting items is GBP 35.1 million, down GBP 8.5 million year-on-year. Operating margins held firm at 3% compared to 3.3% in FY '19, which underlines the flexibility and resilience of the underlying business model. Finance costs increased by GBP 1.2 million to GBP 7.2 million. The impact of IFRS 16 lease accounting increased the interest charge by GBP 1.7 million, which was offset by lower interest costs of GBP 0.5 million on lower average borrowings. Adjusted profit before tax was GBP 27.9 million, down GBP 9.7 million. Overall, the impact of IFRS 16 on adjusted PBT in FY '20 was to reduce profits by GBP 1 million, compared to IAS 17-based accounting. The effective tax rate was 15% with the tax charge of GBP 4.2 million, which is GBP 5.1 million lower than last year as a result of reduced profits. Adjusted earnings per share was 9.7p, down 16%. No dividends will be paid following the completion of the refinancing agreement, which precludes the payment of dividends that relate to FY '20. I will give further detail on the refi agreement later in the presentation. I shall now move on to review the adjusted items in more detail. Pretax continuing adjusting items were GBP 13.1 million, which compares to last year at GBP 7.3 million. However, the cash cost of adjusting items in the year was GBP 7.3 million, GBP 2.8 million higher than last year. The largest component of these items was network and reorganization costs of GBP 6.8 million, which had 3 major elements. Firstly, the outsourcing of central functions to our partner in India, which began in 2019. In 2020, total costs were GBP 1 million, compared to GBP 3.2 million in 2019. Secondly, the restructuring of the distribution hubs in our network incurred GBP 1.9 million of mainly redundancy costs. Thirdly, as a consequence of both the disposal of Tuffnells and the impact of COVID-19 restrictions on our trading, we have significantly reduced headcount in our central services and our DMD and installed businesses incurring GBP 2.7 million of costs. The impact of the COVID-19 pandemic also triggered impairment reviews of a number of the Group's trading assets. These reviews led the Group to write down these assets by GBP 6.4 million in total for the year. The largest component of this related to the full write-down of the goodwill in the DMD business of GBP 5.7 million, reflecting the significant reduction in trading of that business, which trades, primarily in the global travel market. I should state at this point that the statutory continuing and discontinued loss attributed to equity shareholders was GBP 6.7 million in the year. Discontinued operations includes the trading losses of Tuffnells up to its disposal in May, which totaled GBP 18.7 million after-tax. I will now look at free cash flow on a continuing basis, excluding the impact of Tuffnells. Free cash flow generation remains one of the Company's strengths and in these challenging times, the Company has maintained its clear focus on cash generation and liquidity. In a difficult trading environment, the Group generated GBP 10.9 million of free cash flow compared to GBP 33.2 million in the previous year. It should be recognized that the business continued to be cash generative in the second half of the year in the midst of the COVID-19 lockdown. If I look at the free cash flow table in more detail, adjusting operating profits fell at Smiths News by GBP 8.5 million, primarily as a result of the impact of COVID-19 on the business. The working capital movement in the period was a GBP 5.7 million cash outflow. During the peak of the lockdown, we experienced significant returns of newspapers and magazines from retailers, which required to be credited. The gap in receiving the offsetting credit from publishers generated a temporary adverse working capital movement of around GBP 12 million, which is now being fully recovered post year-end. Capital expenditure for Smiths News was GBP 4.2 million higher than last year. This is partly a timing issue in prior year capital commitments that were paid at the start of the financial year relating to IT equipment and vehicles. Smiths News CapEx plans remain focused on replacement rather than growth CapEx spend. Cash CapEx remained less than 25% of EBITDA, in line with previous guidance. Both lease payment and net interest paid increased materially in the year following our revised cash categorization of lease and interest payments under IFRS 16. However, interest payable under the bank facility fell during the period by GBP 0.5 million, as average bank borrowings continued to fall. Tax payments of GBP 2.2 million are in line with last year, as the impact of lower tax payments related to lower profit levels will flow through in future quarters. The cash cost of adjusting items in the period was GBP 7.3 million compared to GBP 4.5 million last year. This primarily represented network reorganization costs of GBP 6.4 million and pension buy-in costs of GBP 900,000. I shall now turn to look at the net debt position of the Group at the year-end. The primary focus of the business has been and will continue to be to reduce overall net debt from continuing free cash flow. At the year-end, closing bank net debt of GBP79.5 million had increased by GBP 5.6 million compared to last year as the positive free cash flow generated from Smiths News of GBP 10.9 million was offset by the discontinued free cash outflows of GBP 15.1 million. The net GBP 15.1 million outflow includes the cash inflow of each sale and leaseback properties in H1 '20, which reached GBP 14.6 million and was used to mitigate some of the Tuffnells trading cash outflows. Disposal costs related to the sale of the business totaled GBP 3.7 million and the working capital loan of GBP 6.5 million provided to the buyers to facilitate the sale during the lockdown period has been fully repaid in October 2020. The cash benefit of the deferred consideration related to the sale will impact FY '22 and '23. It should be noted that net debt is highly sensitive to timing movements in Smiths News working capital cash inflows and outflows and can swing GBP 40 million in 2 months. During the period of the COVID-19 lockdown in the late spring, we saw working capital peak outflow of GBP 12 million as the value of returns of newspapers and magazines from closed retailers was credited in advance of us receiving the equivalent credit from publishers. This temporary negative working capital movement has been fully restored. In the year, we adopted IFRS 16 lease accounting, which resulted in the property leases on our depot was being added to the calculation of net debt. This created a right of use asset with a net book value of GBP 32.8 million. An offsetting lease creditor of GBP 33.4 million was created, giving an IFRS 16 net debt position of GBP 112.9 million at the year-end. However, our bank covenants continued to be measured on the frozen GAAP, and consequently, bank net debt at the full year was GBP 79.5 million, which represents the leverage of 2x EBITDA. All other bank covenant tests were similarly made at the year-end. I shall now turn to our review of the recently completed refinancing agreement. This refinancing agreement is a further step in strengthening our balance sheet following the disposal of Tuffnells and the removal of future pension scheme liabilities. Our existing bank facility was due to expire in January 2021. Following the disposal of Tuffnells in May, we made the decision to resize and change the structure of the facility to better match our expected future cash flow and create greater clarity for our various stakeholders on our future capital allocation. Consistent with the Company's stated strategic priorities to reduce net debt, the new bank facilities for a 3-year term to November 23 for GBP 120 million. The facility includes 2 term loans and the revolving credit facility of a GBP 40 million, which provides us with sufficient headroom to meet our day-to-day liquidity needs and our intra-month working capital cash flow swings. The 2 term loans will amortize; term loan A by GBP 7.5 million semi-annually repayments commencing in April 21 and term loan B by the proceeds from the GBP 15 million Tuffnells deferred consideration and any surplus on the Smiths News-defined benefit scheme buyout, which is returned to the Company. Our condition of the new facility was the absolute preclusion of payments of dividends in respect of FY '20 and capped dividend payments thereafter, for FY '21 up to GBP 4 million and FY '22 up to GBP 6 million. The facility carries an initial margin of 5.5% per annum over LIBOR in respect to Facility A and the RCF and 6% per annum over LIBOR in respect to Facility B. This pricing is higher than the previous facility but remains competitive and is reflective of the more difficult market conditions and tightened credit markets. The margin is subject to reduction as the Company reduces its net leverage, in line with its stated strategic priorities. The financial covenants remain broadly similar to the existing bank facility, although they will taper over the term of the facility as debt is amortized. Additionally, as part of the terms of the refinancing, the Group has provided security over the assets of its principal trading subsidiaries. Our target remains to reduce net debt to 1x EBITDA. However, the time frame has been extended to FY '23 to accommodate the impact of COVID-19 on current and future cash flows and agreed debt amortization schedules to reduce the legacy debt from our earlier diversification strategy. Given the unusual times we find ourselves in with COVID-19, we have updated our growing concern on viability assessments to robustly assess the impact of national and regional lockdowns caused by COVID-19 and have assessed the impact of similar events in future scenarios. We remain confident that we have adequate liquidity within the facility and we continue to meet our bank covenant test under a range of possible worst-case scenarios. I will now hand back to Jonathan.

Thanks, Tony. So as explained earlier and as illustrated on the slide, a great deal has been achieved over the last year. Shown here in blue are the strategic priorities that we stated we would pursue this year, all of which have been delivered. To be candid, I'm conscious this has not always been the case with the wider Connect Group in the past whereas in fact with the Smiths News wholesale business, it's consistently delivered its core objectives right through that diversification period, and therefore, at Smiths News plc, I'm absolutely determined that while we will have stretching targets, we will also stretch every sinew to deliver what we say. And should we ever fall short, we'll be completely transparent about why that was. In addition to our stated objectives this year, we are also faced with the most significant social disruption since the end of the Second World War. I'm also conscious that for all we've achieved our strategic goals, the COVID pandemic and the ongoing measures which impact our market and the wider economy are clearly the most significant for our forward trading. I therefore like to spend a little time explaining what has happened to our sector and what action we have taken and continue to take right now and the lessons we have learned so far. Before I look at sales. I'd like to remind you of the slide we showed you at the interim results, which captures the principles, which have guided our decision-making and served us well throughout the crisis. As I explained at the time, Smiths News is the exclusive supplier in our territories. There is no alternative distributor, and therefore, in addition to the commercial benefit of doing so, we have a wider social responsibility to maintain a full service to the thousands of communities we serve across the U.K., whilst of course safeguarding the well-being of colleagues and protecting the long-term interest of the business. We continue to work to these values today. Safety; safety remains paramount and our processes have been adjusted for appropriate social distancing. I'm delighted to say, actually we've only had a handful of coronavirus infections across the entire Company, and none which can be directly traced back to the workplace. Service; a full service has been achieved as of our -- all of our performance KPIs strengthening our partnership with publishers and retailers and helping us to contain costs. Capability; we continue to work tirelessly to find sustainable mitigating actions and the work we put in has actually opened up new opportunities for the future. And fourthly, sustainability. Supply chain sustainability remains a constant sense check on all that we have done. And actually, although not on this slide, there is in some ways a fifth principle, which is emerged and that is flexibility. We've learned that by applying flexibility and working even more closely with our supply chain partners, we can manage through the crisis more effectively. A good example is the local lockdowns we've seen recently in Wales and the 3 tier system in England, which require different approaches in different areas. By being attentive to the shifts in demand, supporting our independent retailers by being open to a myriad of ways in which we can flex, we can make a big difference to the efficiency and effectiveness of our operations. So let's look now at how we played out in terms of trading. The graph on the slide shows the impact of our lockdown and subsequent restrictions on social movement on our sales revenues. And as you can see, the first 6 months followed a relatively predictable pattern during which our cost savings more than offset the impact of our sales decline. Up to March, newspapers were down around 2.1% and magazines were down minus 4.5%. So within our strategic forecast of minus 3% to minus 5%. The impact of lockdown beginning in March is plain with magazines hit more severely than newspapers, which have a larger percentage of sales through the small and independent stores. At the peak of the crisis in April, magazines were down by nearly 50% and newspapers were down by 18%. Newspapers have a greater percentage of their sale through smaller and independent outlets and there was a greater opportunity to substitute purchases between stores. But they still suffered severely from the changing commuting patterns and the absence of town center and travel outlets. What is most significant however is a relative speed of recovery in both categories as outlets began to reopen, consumers adjusted their shopping behaviors and restrictions on mobility were eased. We should bear in mind that in the cases of magazines, there is often a lag of returns, which explained the fluctuations between June and August. But the trend of strong recovery will be clear and was ahead of our initial expectations. So we entered the current year with sales down and clearly more so than in the pre-pandemic but with much greater resilience than might have been predicted. And in September and October, there was still around 600 outlets closed and commuting patterns and limits to travel were still impacting sales prior to the recent lockdown. So we expect a further challenging 6 months before any improvement in the second half. In comparison to the huge fluctuations in sales, this slide shows the impact on our EBITDA. The much lower levels of volatility in sales was driven by 4 key factors. Firstly, the flexibility of our operating model that allowed us to reconfigure routes and processes in response to fluctuating volume. Secondly, the multiple income streams of sales revenue, delivery service charge, another revenue such as waste recycling. Thirdly, the actions we drove to reduce central costs and the application of best practice across the network, which helped to limit the extra expense of rough writing to new procedures. And fourthly, the commitment of our people and partners, which though less tangible, plays a vital role in the consistent delivery of service. As a result of these 3 actions, our final quarter delivered an underlying trading EBITDA of GBP 10 million, from our conditions, which are broadly similar to those which continued in September and October and November to date. So, turning to efficiencies and our ability to deliver these throughout the crisis. The graph on the top of this slide shows our track record in achieving efficiencies sufficient to offset revenue declines in Smiths News. This is the foundation of the Smiths News' consistent delivery of cash and profit over the last 10 years, where typically we have offset between 3% and 5% of sales declines. The only year in the last 10 that we failed to achieve this was in 2018, in the year of the attempted integration with Tuffnells, which created diseconomies rather than efficiencies. In 2020, as everyone will be aware, we've had an additional and exceptional impact of COVID-19, which inevitably means we could not fully offset the margin impact. To illustrate this, we've indicated in dark blue what the impact on core sales decline would have been had our first half trends carried through the full year. This amounts to approximately GBP 6 million of margin impact. Offsetting this, we had GBP 6.7 million of core operational savings shown in light blue. So, in a normal year, this would have been more than sufficient to offset decline in core revenue. The orange bar show the additional impact of margin as a consequence of the initial shock of lockdown and the ongoing restrictions. The green bar at the top shows an additional GBP 1.1 million of what we've termed flex savings. This is where we've been able to reduce our roots in response to a lower volumes. In essence, the directed operational impact of COVID resulted in a GBP 6.3 million reduction in sales margin that was partially offset by a GBP 1.1 million of operational savings. But to complete the picture and understand where we stand in relation to this year, there are 2 other factors. Firstly, as we have previously shown, the severe impact on sales from the lockdown is recovering and we had a much stronger final quarter than we had anticipated. So while we continue to expect uncertain times, it is the long-term trajectory of these graphs, which underpins our strategic planning and gives us confidence in our ability to achieve the necessary savings over the life of our contracts. And secondly, we also made significant savings in central costs, over GBP3 million in the year and these will also flow into FY '21, together with the savings from these costs, which transferred with the Tuffnells business. In total, the benefit this financial year will be in the region of GBP 8 million. And looking ahead to operations this year, whilst the additional safety requirements have added cost to some areas of process, they've also created opportunity by shedding new lights on the way of working. For example, the extent to which we can flex our operating model, we can buy many routes, or another example, the benefits of home working. The securing of our contracts also opens the door for new network and supply chain savings. Now we are clear on the territories we will be serving for the next 5 years. So whilst the outlook remains uncertain, our track record and the actions we have taken gives us confidence that together with the application of our ongoing principles and process flexibility, we continue to fully offset the impact of core margin declines and minimize the further impact from the uncertain fluctuations resulting from the pandemic. From a market leadership perspective, Smiths News is a clear market leader on all the key metrics. We have the largest market share, the highest-ranked service, the most profitable business model and the best track record of performance. In addition, the last 12 months has seen us deliver on the big strategic enablers. So now we are able to free our focus up and concentrate on core trading and creating value over the lifetime of our contracts. To do that, we will focus on 3 key themes; process efficiency, category profitability and supply chain sustainability. And as you all know and understand, a critical element of our business model is our ability to drive cost savings to mitigate the 3% to 5% revenue decline we experience each year. This year will be no different. This will come from a variety of activities, including reducing our physical network, reducing routes and encouraging our retail customers to transact with us via our app rather than using our customer service centers. We also know that our retail customers find our category complex. It's difficult to manage because the number of titles, the frequency of tighter publication and the sale or return nature of the product. With this complexity, comes cost for our retailers and this process reduces the contribution the news and magazine category makes to the retailers' profitability. This in turn can reduce the space a retailer wishes to dedicate to the category. In response to this dynamic, we have built an e-pass-based operation and commercial model, which for our largest customers can save them up to GBP 2 million a year in labor. We have 2 scale customers live on our solution and hope to have at least 3 more over the coming 12 months. We also believe there is an opportunity for new scale retailers to stop the category, now that the complexity can be removed. In relation to the wider supply chain, we plan to be proactive in exploring ways in which it might be possible to structure overall costs, collaborate with our industry chain supply chain partners, and finally, we must also ensure that a highly successful subcontract to find in our model is revised to support the growing demand for a greener solution for distribution in the major cities. The combination of process efficiency, category profitability and supply chain sustainability, are the key variables in making our model a success. And as you can see, we have a clear plan to continue developing these over the short and medium term. Now, before I wrap up, I wanted also to discuss the other significant event of the week, our new refinancing agreement, which was announced on Monday. The agreement aligns perfectly to our strategy, which we've had for some time, but in relation to which progress has been held back by the drag on profit and cash caused by Tuffnells. First, some context, following the disposal of Tuffnells, the Company has a focused on straightforward business model. We are the clear leader in newspaper magazine wholesaling with scale and efficiency that provides a solid foundation for our business despite operating in what we all acknowledge are now mature markets. Those markets and our exclusive contracts however provide us with highly predictable revenue streams, especially now that all of our contracts are secured until at least 2024, and furthermore, we have a cash generative and capital-light business model with much of the investment in systems and network behind us. But despite all of those strengths, we have a legacy of debt from the former diversification strategy. So our objectives are equally clear and straightforward. Over the lifetime of our contracts, we aim to materially reduce the burden of debt and its associated interest payments. By materially, we mean a minimum of GBP 50 million per annum for the next 3 years, delivering a ratio of bank net debt to EBITDA of less than 1x by 2023, whilst also maintaining the leading role in the supply chain that helps renew future contracts. And in doing so, we aim to deliver tangible improvements to shareholder value through a combination of: the reduced burden of debt and associated interest payments; capital growth from improved performance and a stronger underlying financial performance; the restoration of a dividend policy from the growth in surplus free cash as our debt reduces. Future contract security, as we cement our market expertise through clear focus on our core competency. And so, to conclude today's presentation, looking at our priorities for the year ahead, operationally, we must manage through the COVID crisis, continue to proactively manage through the period of uncertainty, meeting our social responsibilities whilst protecting the long-term interest of our business. Delivering sustainable efficiencies, which reduce our operational cost through a combination of network and process optimization and a material reduction in central costs. We must maintain our service KPIs that deliver efficiency and minimize waste and rectification costs and we must maximize the sales and category opportunities that I spoke about earlier. From a shareholder perspective, we plan to strengthen the balance sheet with a material reduction in net debt, leverage our cash generative and capital-light model to deliver positive shareholder returns from a combination of capital growth and restoring the dividend. In terms of outlook, we all know that the months ahead will be uncertain, but trading to the end of October was in line with expectations. But of course, we're now in lockdown 2. The impacts of which are perhaps too early to call. However, that said, there are 1 or 2 encouraging signs. So, for example, in lockdown 1, we had over 2,000 retail outlets closed. Here we are, 1 week in to lockdown 2 and we have 110 stores that have closed, so very, very different. Secondly, only 1 week into lockdown 2, but our newspaper sales are only 1% down week on week, which again is a very big contrast to lockdown 1. So we can't say at this stage in time after only being in the lockdown for 1 week, that, that is what's going to happen going forward, but is at least encouraging, encouraging enough to believe that lockdown 2 may not have the same impact on our business the lockdown 1 did. So, all of that said, we are well prepared to manage through the continued uncertainty, and in the medium term, as we look towards more stable times, we're equally well positioned to build on the foundations we have laid down this last 12 months. Thank you for listening to our presentation and I'm now ready to take any questions you may have.