Spectris Limited (SXS) Earnings Call Transcript & Summary

Good morning, and a very warm welcome to the Spectris Trading Update First Quarter Conference Call. My name is Candice and I will be your coordinator for today's call. [Operator Instructions] I would now like to hand the conference call over to our host, Andrew Heath, Chief Executive. Please go ahead.

Thank you, Candice, and good morning, everyone. Thank you for joining. I'm joined this morning by Derek Harding, our CFO; and [ Matt Wooden ], our Director of IR. Today, we published our results for the first quarter of 2023. And as you know, in October, we unveiled our strategy for sustainable growth along with a set of ambitious medium-term targets for the business. Our first quarter results, which we published today demonstrate clear progress on this journey. We have transformed Spectris over the last 4 years. And today, we're a very different company, a higher quality, higher growth business following the shift in both the portfolio and focus of the group. We've made a very strong start to the year, achieving organic sales growth of 24%, with acquisitions contributing a further 3 percentage points of growth during the first quarter. And this performance reflects market share gains and continued execution of our strategy, with all our businesses growing strongly in the quarter across all regions, which clearly underlines and demonstrates the quality of our businesses, their advantaged positions in attractive markets. Our progress is underpinned by a number of macro trends, including numerous sustainability teams such as the dry for green metals, green mining and green energy, a move towards greater automation and electrification as well as the onshoring [indiscernible] semiconductor and pharmaceutical sectors. Our customer-centric philosophy and approach is also helping us solve some of our customers' most critical challenges during this transition. Additive really being further reinforced to our investment for growth, we enhanced levels of R&D in line with the guidance that we provided. We finished the period with net cash of GBP 278 million and the strength of our balance sheet provides us with great capital allocation optionality, giving us the opportunity to compound growth through targeted M&A as well as continuing our share buyback program. As expected, customer demand and continue to normalize and across many of our markets as order intake returned to more typical through the cycle growth rates. Our strong SaaS though combined with a book-to-bill greater than 1, a record order book, easing supply chains and with margins progressing to plan reinforces our confidence in the delivery of our guidance for the full year, namely, organic revenue growth of 6% to 7% and strong margin expansion with the rating of profit expected to be higher than normal in the first half. These results would not be possible without the hard work and dedication of our people across the world. And I'd just like to take this opportunity to thank all of them for their continued support. And it's been particularly wonderful to reconnect with our staff in Asia in recent months and thank them in person. With a clear strategy and purpose, we remain excited by the significant opportunities that lie ahead of us as a leading sustainable compound growth business. And with that, we're very happy to take questions.

[Operator Instructions] Our first question comes from the line of George Featherstone of Bank of America.

So I'll start really with a fairly very strong quarter, not just in terms of revenue delivery you have. Clearly, incoming demand is also pretty strong given the [indiscernible] you've noted. So just thinking in terms of the outlook for the balance of the year. No guidance upgrade at this stage. I can kind of understand why given this early, but is this kind of your typical conservatism that you're thinking about here in terms of sort of the balance of the year and not raising the guidance at this stage despite strong Q1? Or should we be cognizant of some other factors into the second half of the year perhaps making more reticent about the forward-looking demand prospects?

George, thanks for your question. Yes, clearly was a very strong quarter. We have benefited certainly from easing supply chains on top of continuing good demand growth from customers, which have allowed us to pull forward some sales into quarter 1 and deliver an exceptional quarter. But I think if your question is about our concern in the second half, we're not concerned. Our performance in the first quarter book-to-bill, still above 1, continued strong demand. Yes, some of our markets are normalizing, but we talked about over the full year, as always, that's as expected. We're also seeing some markets like academia and primary materials actually picking up more strongly over the last 9 months and that trend has continued. So as we look forward into the second half of the year, we've got a record order book, about 5.5 months of order cover. I think the way to look at it is really that we are -- our Q1 performance really derisked our H2 [indiscernible] the Q4, which is a particularly very strong comp from last year. So we're delighted to have wins in Q1. So as we said in the statement, we just reinforce confidence in within guidance.

Thing just I would add as well, George. Some people have missed this in the statement, but there's GBP 24 million of revenue last year that relates to contract life sciences that we won't see this year. So taking a straight percentage on last year's number can result in sales number that looks pretty topic. So just as you are [indiscernible] modeling, you need to keep that in mind that contract life sciences [indiscernible].

Okay. Understood. And then maybe just a second question, thinking about life sciences and pharma. There's lots been made recently over a weaker demand in that particular area. You've called out some normalization statement, but I just wonder if you could talk about how your products fit into the production levels for customers in that space because it strikes me that the scientific in particular, the products that you ultimately made that shouldn't be exposed to anything like a destocking cycle that might be happening there at the moment?

Yes. I think we've repeatedly said in really our businesses aren't exposed to destock the inventory. What we sell are for discrete projects in pharma, life sciences, it is high, they wouldn't see reequipping laboratories, particularly in sort of the drug discovery and development, skewed towards drug discovery and development in the art of sort of quality control in sort of downstream manufacturing activity. Equally, we lost 1/3 of our revenue out of scientific is sort of do with sort of aftermarket after sales service calibration, and we're not hugely exposed to a large sort of consumables within our aftersales revenue stream as some of our peers are. And I think there will be other things to sort of factor in. If you look at some of our [ PC ] to sort of 30% plus growth last year, we're heavily exposed into the sort of pharma life sciences. We can see as much as that sort of super stellar growth that some of them saw off the path of sort of COVID investments and post-COVID damage. So we were a bit more muted on going up. And therefore, if it normalizes, we've seen less -- far less impact than some of our peers in that regard. And we've been talking about now for the last few quarters about sort of farmer was the first sort of end market for us to sort of really pick up post the outbreak of COVID in 2020. We saw sort of farm owners really sort of it came off like for everybody in sort of Q2 of 2020. But in Q2 onwards, we've seen strong order intake in pharma. And that sort of the peak happened sort of 12 months ago and was normalized [indiscernible]. So for us, it's 25% of our revenue at a group level. We like the exposure we have there. It's normalizing. But as I said earlier, to prime materials, academia have really picked up in the last 9 months and it helps us to balance our overall order intake in the group.

Okay. One final question, just if I can squeeze it in. On the other businesses, clearly, a very strong performance there, too. How much of that is related to actions that you're taking versus market recovery there? And given the improvement in volume that those businesses have seen should we see a commensurate step-up in margins too?

Yes. I mean, we're pleased with the performance of both the businesses with another red line on several mix. They're very much a little respond into the treatment that we've been applying there. As we said before, we continue to invest in those businesses. So we are seeing some new products coming through, which is driving that growth. But I think it's fair to say that they were certainly helped on the red line results in Q1 by even supply chains, particularly semiconductors, which allows sort of a release of some of the bottlenecks we had in manufacturing allowed us to ship quite a lot more product than we're anticipating going into the new year. So of all of our businesses, red line has some maybe the biggest exposure to semiconductors with all the products that ship pretty much stuck -- electronics. [indiscernible] that in the supply chain, in particular, over the last 3 months has really helped the business, which is we don't see that come through in the sales growth in the first quarter.

Our next question comes from the line of Harry Philips from Peel Hunt.

A couple of questions. Just it's -- maybe Rob chose to describe an 80% organic revenue growth in Europe as being sort of be -- but clearly is low and the other parts of the business and Europe seems to have been against some relatively weak comps for other companies, quite strong. So maybe just a little more detail around that. And then in terms of the GBP 278 million net cash, I'm not sure, maybe but I haven't got it in my mind, how much of the buyback is done within that GBP 278 million in terms of where you think leverage -- or not leverage, but net cash might be easy by the year-end because clearly, that strikes me as a better performance than certainly I might have anticipated, particularly with the growth in working capital absorption that would entail?

Yes. So I'll ask Derek to answer your second question, Harry. But in terms of Europe, I mean, I think the profile of our sales growth in Q1 across North America, Europe, Asia, really reflects the order intake that we've seen in those 3 regions over the last 12 months. So I don't think there's anything really sort of special to call out about Europe. I mean Europe has been a little bit weaker than the other 2 regions. But even so we are seeing -- we've seen good order intake over the past 12 months in automotive, especially around electric vehicles, quite a lot in terms of sort of specialty chemicals, materials for sort of factory developments, catalyst developments. The NEC sort of transition in Europe is also a clear focus area and has been helpful for the books of all businesses over the last sort of 12 months. As I say, if you look at the profile of the revenue in Q1, that really reflects the gain of sort of order intake profile over the last 12 months or so.

Fantastic.

And then on the buyback, Harry, we have about GBP 100 million still to go, running this year and then a couple of other bits that will come out this year. So we've got the final dividend and the interim dividend or come out with sort of in normal one. CapEx, I guided to about GBP 40 million. I think when you take all of that in the round, the guidance that we gave at the year-end still stands. So I think mostly as an to get us with a net cash position of mid GBP 200 million-and-something kind of in line with where we are now and so the buyback takes out the term for that.

Our next question comes from the line of Jonathan Hurn of Barclays.

I just had a few questions, please. Firstly, with just on comments on market share gains. I wonder if you could just sort of elaborate on that and just sort of talk us through where you think you've been taking market share and essentially what's been driving, has it been that sort of new product development? That was the first one.

Thanks for your question. I mean, fundamentally, our sort of the market share gains we are seeing are really coming from 2 areas, one being new products. So if you look at cost dynamics, we are seeing continued really strong growth in virtual test, the desire for our auto customers to drive greater efficiency in prototyping, reduce time to market, reduce risk, reduce cost through our sales related [indiscernible] take out 20% of the cost and that 50% of the lead time of prototypes. So there's a big productivity driving what the sustainability drive for them. So we're seeing strong growth there. We've got a very strong franchise from the organic investment we're putting back the business for the bolt-ons. But also across the electric vehicles, electric powertrain testing capability within Dynamics continues to very strongly have a lot of interest from customers. We're not growing from virtually looking 4 years ago to between EUR 40 million-odd revenue a year at the end of last year where we've done on sort of OEM sensor, smart OEM sensors. Again, over the last sort of 4 years, we've seen as we're doubling the revenue growth there from the investment we put in. If you look at Scientific, we are driving a range of new products to sort of supplement our insurance within the workplace for pharma for electronics, basically higher levels of measurement or de-measurements to comparing what we do both things sort of in the pharma discovery side. But also the micro contamination which include [ MS ], but equally, on our electronic side for materials, mining, we're certainly looking at we've got some new products or sort of helping to sort of improve the automation within mining laboratories that's getting great traction with some of the larger OEMs with anything for greater efficiency and better yield improvements to the mine. So all the sort of new products we've been talking about and the launches that we've publicized in our results statements over the last 2, 3 years, are really helping to drive our growth. But I'd also say it's down to a very conservative focus on where we have advantaged positions and attracted end market segments. So we're very disciplined where we're -- where we put our focus where we invest our money, where we invest time and effort from our sales and marketing activity and we've done quite a lot in terms of training and development, the sales force particularly around sort of strategic accounts and large accounts such that we can drive greater levels of sales with key customers. And I think that's been particularly successful in Asia, just recently scientific. I mean with new material customer in China over the last 12 months, we've basically unseated a competitor and sold 30 instruments into that customer over the past 12 months really as a consequence of focusing on what they do, the value we can bring and strategic counseling. And that's proved to be very successful and that's just one example that may. So it is that sort of what I talked about at the beginning where we clearly changed the portfolio of the group. We've improved the quality of the group, but within the businesses that we kept, we have been very disciplined with focus about where we see the most attractive end markets that have aligned our product strategy and our sales and marketing efforts to really then go and try to overcharge the growth there and see the benefits of that as we speak.

No, that's very clear. The second one, maybe for Derek, just coming back to margins and obviously the growth and the mention is strong. Can you just clarify strong and what it means? And also just as we look at that, I believe, '23 versus '22, can you just talk us through some of the main moving parts of the margin expansion? I think we've got some savings coming through from SBS, for example. Those kinds of sort of things, that will be very helpful.

Yes, sure. So strong is better than good. Last year, we had a good margin expansion, which was 50 basis points. So we hope to do slightly better than that. Obviously, we have benefited or we will benefit from a mathematical element of the contact life science business coming out. So as I said earlier, there's GBP 24 million of sales last year that related to that and GBP 200 worth of profit relating to that. So if that weren't there last year around margins would have been closer to 17%, rather than 16.8%. So there's a little bit of benefit there [indiscernible]. I think, as I said, I think you actually do it the year, but I'm not going to do a kind of quarter-by-quarter or year-by-year bridge on the margin. We're on our journey towards 20% plus that we were confident getting at. If you look at '23 specifically there, some of the drivers, obviously, there is pricing that will come through that we talked about at the end of last year, where we had costs increasing last year and the prices in the order book, we'll start to see that come through this year. So that will help the gross margins, which will also get down through to the margins. And we also are seeing the supply chain easing and that's making life a little bit easier, and therefore, the costs of producing the products would just be slightly less because it would be more efficient in terms of how we operate. And that, in many ways, is the reversal of the margin challenges that we described about 2022 weeks ago in the full year results. So we expect that to reverse and we are seeing that happen. So that's important too. In terms of SBS, that's a continuous area of focus in the group. So that, along with the ERP, which will be live this year or benefit this year and that will happen over the next couple of years. But that continuation of just focused efficiency, driving SBS through the organization and then the ERP that comes live over the next 18 months are the pillars towards the 20% plus. And nothing has changed in terms of that journey from what we set out in October and until what we saw at the February announcement.

Great. So...

So just on the last point, Jonathan, if I may, I mean, [indiscernible] ago, where we put all our strain ages together put dynamics. So we have about 600 people in the client in [ Suzhou ]. The [indiscernible] over the last sort of 2, 3 years on SBS sort of leaning out the facility, improving the flow and it tangible when I went to the difference in numerous timing events on a quarter basis was driving that improvement efficiency, waste reduction, due to a time, lower working capital, better safety practices, everything that Derek talked about as well in terms of in the financial benefits. I mean we are -- as we talked about last over longest a journey that we've seen really great progress momentum now and it's really starting to mature in all of our businesses.

Very helpful. And then maybe last one, just sort of a very favorite topic for you guys, M&A, obviously, net cash balance. Can you just talk us through the landscape and what you're seeing right now? I mean, you're saying the pipeline, obviously, in the statement is very active. I don't know what you can say on that. And in terms of your desire, is it -- is there still a desire to do large deals? Or have you kind of thought or actually maybe sort of mid-sized bolt-ons or probably the way forward? Just any comments you can about what we can expect on the M&A side?

Yes. Yes, happy to, Jonathan. I mean it's been a bit of a quieter period over the last 6 months given the general market backdrop, cost of capital, big companies, some of the processes that were going to get launched has been delayed. I think some of the set perspective sellers feel what's the end of the market is on right, so we put things on falls. However, we do have an active pipeline as we put in the statement, we're always talking to numerous parties at any point during the year. As you know, it's the numbers again. It's just not really a matter of what we can get over the line at the right levels of returns that satisfy our capital allocation framework criteria. But we remain active with thinking of loans is very much sure we're trying to sort of more bilateral conversations wherever we can. And that's the process that takes quite a bit of time to build relationships, cultivating the opportunity and really trying to move it towards bilateral exclusive process if we can. And then your other point about sort of size of deals, I mean, look, as we said over long, look, everything from early-stage technology clearly small bolt-ons, medium-sized bolt-ons and larger businesses. I think it's just the nature of the markets in which we play and where the opportunities lie. But clearly, we're very mindful of that as being disciplined against our capital allocation framework. And that's obviously, at the moment, given sort of market backdrop, cost of capital makes life a bit tougher. But we continue to sort of work the landscape and try and cultivate those opportunities in those.

Our next question comes from the line of Andrew Wilson of JPMorgan.

I've got 2. And I'll start with, I think, the integrity. In terms of the commentary around expecting a sort of, I guess, more of the contribution from the profit in the first half than typical and maybe than previously expected, is that just a function of just how good the Q1 volumes have been? Or are there kind of other things that you're seeing in terms of whether you want to call it margin bridge or whatever else that's kind of shaping our thinking with regards to the sort of the timing of the profit this year?

Yes. So yes, Andrew, thanks for your question. I mean I think it's a combination of a number of things. Clearly, we've got -- we had very strong sales growth in Q1. We've got good operating leverage off those sales. But at the same time, as we talked about in the full year, we are progressively seeing margins -- gross margins in [indiscernible]. The first half of last year, we saw quite a bit of gross margin squeeze because of input cost inflation. Supply chains have continued to ease and actually that process has accelerated faster than we anticipated coming into the new year so that we benefit on this revenue line, but also a bit more on the margin line as well. And we're certainly seeing less input cost inflation, but that's in line with what we expected coming into this year. So a number of moving elements really.

Yes. That makes sense. I also wanted to ask around the book-to-bill in the Q1. And I guess I'm thinking a little bit in terms of how I should think about that number because I think historically, book-to-bill has generally been pretty good in Q1 and obviously, the timing of your sales being often quite heavy Q4 would kind of tie in with that. But then obviously, this year, you've had such a good revenue quarter as you managed to catch up on the previous backlog that still at the denominator and that has been somewhat inflated. So I guess, is almost a question of sort of where you see sort of underlying book-to-bill, so to speak, is and whether the order trends have actually trended as you expected, notwithstanding, obviously, the number gets distorted by the higher volume. Hope that question makes sense, well, sure it did, but [indiscernible]?

Yes, no. But I think it's quite a nuanced situation. At the same time, we go back 12, 18 months where we were seeing strong demand with tough supply chains. We have the inverse issue. And therefore, we geared up to -- we were looking at what 30% order growth in Q1 last year and a very strong book-to-bill [indiscernible]. But so as markets normalize, our supply chains sort of normalize as lead times start to eat back. So we'd expect to see them, then you expect also to see sort of our sort of order visibility also start to normalize as well. And we talked about sort of 3 to 5 months being maybe more sort of typical normalized level of visibility for us versus the sort of where we've been for the last 6 to 12 months -- round about 6 months. So over this next sort of period through this year, we are going to see a progressive normalization in all of these things and it's just at which the price of it happens quarter-on-quarter. But I think we just need -- we all need to sort of look to look through that over a longer period of revenue quarterly basis for the next quarter-by-quarter basis, you could draw wrong conclusions. And for us, we're very happy we've got a record order book even with 24% organic growth, we had a 1.03 book-to-bill ratio, that's -- we see that as a big positive.

[Operator Instructions] Our next question comes from the line of Mark Davis Jones of Stifel.

If I can push you first a little bit more on that normalization point is the word that we've all had very much front of mind over recent weeks and months. But it sounds like in pharma, you're looking at things slowing from slightly calibrated growth to more normal growth. But are there any markets where that normalization process is leading in your mind to a sort of sharp year-on-year decline this year, particularly areas like semis where we've seen some huge CapEx cuts in some regions? I know it's not direct CapEx equivalents for you, but any area where you'd see a sort of negative year-on-year to kind of this time line?

So I mean, again, it's a little because about how I respond to Andrew's question around the sort of normalization because we've got some very tough comps in some industries like pharma and semi through this year to compare against. So from an order perspective, they're both decelerating sort of slower growth than we've seen. But if you look at our sort of semi order book alignment, I mean a number of our product lines are sold out to next year. So we've got a very strong order book. So as the situation normalizes, we may see some gaps in the period where the orders do drop down a bit, but we've got plenty in the backlog to deliver against through this year and into next year. And certainly, from a sort of a semi perspective, we are seeing continued good sort of demand from the CHIPS Act, the effects in the U.S. post could act in Europe. Maybe I'm sure in this going on is the sort of new fabs to be built in the U.S. for the next 5 years or so with EUR 50 million. And we certainly noted of micro contamination perspective of our PMS business, we get expected to a lot of that. So that provides a massive underpin for our PMS business. And equally, when it comes to the rate for analyzers within the [indiscernible] business that, again, specked-in for all the processes. That just helps underpin demand. So I think we could easily end up with a negative order position on some of this, but you'll see strong revenue growth this year and next year as well.

And I would just add as well, Mark. When we talk about normal, it is to our new through-cycle growth rates. So we're not talking about reverting to a previous sale for Spectris. So to be the fact that we've reshaped the group and fully made at the Capital Markets Day and again at the year-end stay strong. So we're seeing it normalizing to continue to get us confident of that 6 to 7 through-cycle growth that we've been talking about.

Fantastic. The other one I just had was on the reshoring point you referred to a couple of times. What about the flip side of that? Are you seeing any risk in your -- particularly your Chinese sales base as the sort of deglobalization process continues and it all becomes with more protection as to what you do specifically niche enough that you avoid any of that?

Yes. I mean, I think it's saying it's too early to make call exactly what's going to happen. I mean there are some risks clearly in terms of sort of some of the [indiscernible] control restrictions that may be applied in the semiconductor space, but the fact that the world needs -- semiconductors are strong demand. They've got to be made somewhere and the fact that there's a sort of deglobalization happening with some restrictions in China, we're getting the benefit of the fact that there's big investments going into North America and into Europe to compensate for that. And so net-net, I don't foresee a particular challenge for us in the short term. How it all plays out in the longer term, I think we all need to wait and see to some extent. China for us is an important market. We saw strong growth opportunities where we have a very strong team. And I'll outline as I said a few weeks ago and it was great to see the best enthusiasm clearly in China despite the fact that these sort of isolated from the rest of the world for 3 years. We may certainly see lots of opportunities to go after. An example, I responded to Jonathan's question around sort of strategic accounts, large accounts in China, we're breaking into other areas as well. So I think for us, we see it as a sort of risk-managed growth when we look at China. There's some risk we've got to contend with, but there's plenty of opportunities [indiscernible] drive and look at other areas of the market in China, where we can sell our product and services, compensating will continue to grow like that.

Our final question comes from the line of Andre Kukhnin of Credit Suisse.

I just wanted to check on pricing. First, could you give us an indication how much of that 24% organic growth was due to price? And whether you've moved prices up further during -- since the start of this year?

Andre, nice to hear from you. I mean is that happened in Q1, I mean, there's sort of ratio of volume to price is about 60-40 of the organic growth that we got. So it's actually a very similar profile to what we saw last year. And the full year if you remember, we talked about that volume pricing ratio in [indiscernible] this year. We haven't yet seen that in the revenue line, but we can see it in the order book. And so it will happen as we progress through the year. So we'll see a bit more price than volume coming through. And in terms of your question on pricing, I mean, we've -- sort of we've got our pricing book up in Q4 in October. So effectively, we have been benefiting through Q1 from some of that increased pricing coming through in Q1. And obviously, that helps or [indiscernible], we reinforce confidence in terms of our strong margin progression for [indiscernible] this year.

And if I may ask, the Amazon National Instruments deal, does that change much for you, a, from operational perspective than on the competitors, obviously, actual move quite puzzling I think, for many of us. So do you expect that kind of National Instruments competitive change, potentially because if you can talk about it, that also does it change your kind of sense of urgency for large M&A?

I mean, we don't -- I mean, we've obviously been watching that deal progress. I mean it's -- the sort of [indiscernible] on National Instruments, which I think underpins the course of the business in sort of the quasi businesses in our space and from our Dynamics business for us and parallels, we actually -- where we typically don't compete with National Instruments head on in many of the end markets. We provide the sort of premium data acquisition products, the software. National Instruments are more in the sort of medium through those space. So we do a little bit of overlap from time to time. But if customers want real sort of high fidelity, high accuracy, high bandwidth data acquisition systems, then they will typically buy from [indiscernible] business for that. In terms of where they've got a similar sort of desires that we have in terms of increasing their software sales, I think which has been part of what we're attracted by. So there are lots of parallels in terms of sort of the nature of the business and the sort of the respective value of the businesses, but we don't really compete head-to-head that often.

Got it. And does that change anything in terms of that kind of attitude and sense of urgency on large M&A?

No. No. I mean we clearly got a strong balance sheet. It gives us plenty of optionality. We are, as I said -- as I told earlier, we continue to sort of have an active pipeline relative across the landscape of where we can find good infills, good bolt-ons. There were some potential larger deals, but it's much more at what does it do for our customers. How does it expand our world of offerings? How does it deliver synergies and to deliver strong return on invested capital in line with our cap allocation framework. That's -- we don't see a burning need to go and do something, let's say, competitive pressure.

Great. And then very last one, if I may, just a quick one. Just noticed the 50% growth rate in rest of the world for you. And couldn't resist asking what was behind that?

Right. So this event were now 50% [indiscernible] 10% of our revenue. So it was -- it's just you can see quite big swings on a relatively small amount of quantitative moves on rates. Again, mainly I get with it in places like Taiwan, Korea, Japan, particularly against the semiconductor electronics really strong for us.

Thank you. As there are no additional questions at this time, I'd like to hand the conference back over to Andrew Heath for closing remarks.

Thank you very much, and thank you for joining us with your questions. Look, I mean I think the key message for us today is that we are a very different business. We've published our new strategy was the same with both at the Capital Markets Day in October last year, along with what I think the market is always ambitious targets and our Q1 results and our progress that's been building on the momentum and our strategy over the last 3 to 4 years in reality I think does demonstrate clear progress against both our Capital Markets Day targets, but also the quality of the group, as I said, and in ensuring that we've been on in transforming the business. We are a very different business today and that's coming through in our numbers and I look forward to updating you on further progress when we get to the half year. So thanks again for joining and thanks for your questions.

Ladies and gentlemen, this concludes the Spectris Trading Update first quarter conference call. Have a great day ahead. You may now disconnect your lines.