Steel & Tube Holdings Limited (STU) Earnings Call Transcript & Summary

Good day and welcome to the Steel & Tube 2020 Financial Year Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mark Malpass. Please go ahead.

Thank you. Good morning. Look, I'll start with an FY '20 snapshot on Steel & Tube's overall performance for the year. The market environment has been fairly challenging through FY '20. In the first half, we saw reduced vertical construction work and ongoing softness in the stainless steel market. The COVID-19 pandemic has clearly had a significant impact on our second half results, and more than offset some of the promising improvements that we have been seeing from late calendar '19 through to the pre-COVID period in March. The level 4 lockdown in late March and April, occurred during a traditionally high earnings period for us as a business. Post lockdown, sales have recovered through May and has been closer to prior year for the first -- for the last 3 months of trading through June, July and August. In response to the anticipated COVID-19 market conditions, we have accelerated branch network changes, including some consolidations and also progressed business restructuring and digitization. The FY '20 result does include noncash goodwill impact of $37 million impact that we announced at the first half and other asset impairments we had also flagged at that time, including provisions for increased doubtful debts and a provision for backdated holiday pay obligations. We delivered strong net operating cash flows of just under $40 million due to continued working capital discipline, and we've significantly reduced our inventory position down to just over $100 million. Cash at year-end was $17.4 million and borrowings reduced to $10 million. Moving to our response to the COVID-19 pandemic. In terms of our direct response, we were supplying some essential services, approximately 170 companies through the late March-April COVID lockdown period. And we worked with a company called RFIDER to develop contact tracing systems that was recognized as best practice and shared within the industry and also our customers and other partners. All of our sites were closed, with our customers supported online through digital and through safe business trading. We also took a very -- a prudent approach to running that business. In terms of capital management, this included cancellation of the first half '20 dividend payment and no final dividend declared. We received government wage subsidy of approximately $6.6 million. We also -- excuse me, all nonessential capital and operating spend was either deferred or canceled. We also took the 5-week lockdown as an opportunity to advance our strategy work. Our forward modeling of sales led us to accelerate our long-term restructuring plans. So we're able to advance our network changes and closing either consolidating sites. We identified about 11 sites in that category. We also exited our Wellington corporate office. And we've also been resizing our organization to match a reduced market size. Somewhat fortuitously, we had also deployed some new technology pre the lockdown period. So pure cloud phone systems and e-commerce web stores were set up. So for the 170 essential services that we were providing support to, we were able to support them through the lockdown period by diverting phones through Auckland, and that also gave us confidence to move ahead with this as a business model that we've now set up as part of our customer excellence service center. COVID-19 obviously had a considerable impact on our financial performance in March and April. As I mentioned, sales have recovered through May and then June was in line with prior year, and July and August have also been trading at similar or closer levels to prior year performance. Moving to our strategic response to the new normal. We didn't waste the lockdown period. We have reduced our overall network by 8 sites in the financial year 2020. And we have identified a further 3 consolidations and closures in FY '21. I'll cover the workforce shortly, but we have reduced our workforce by about 10% in the FY '20 period. And we have also identified plans that by Christmas this year, we will have reduced in total about 20% of our workforce. It has a full year a benefit of $12 million to $13 million and in-year benefit of $10 million. Our FY '20 restructuring rationalization and impairment costs were about $11.3 million, that excludes $46.1 million impairment on intangibles and $0.7 million for holiday pay provisions. The careful and prudent working capital management did result in year-end cash of $17.4 million and borrowings reduced to $10 million. So we're well positioned with a strong balance sheet and a leaner cost structure as we go into FY '21. We have also accelerated investment in digital technology, providing a critical platform and key point of difference for our customers. We have also reset our customer segmentation and ease of service model, including customer excellence center and technical support models. So we have a very clear strategy moving forward. I'll now turn to talk through some of the benefits that are flowing through in terms of the organizational restructuring. Our restructuring is progressing well, and we are finding new ways of working through digital that are being implemented and helping to significantly lower our cost base. On the left-hand side of the chart, you can see on an FTE, full-time equivalent basis, we were down about 55 heads ahead of the COVID impacts. And I guess we realized through COVID modeling that we would need to reduce a further 150 to 200 people. And that's basically made up of about 125 white-collar employees, 30 blue-collar and 45 blue-collar installation workers moving to third parties. Obviously, these are very difficult decisions, and we are aware of the impact these changes have. But as an update, as at June 30, we had reduced about 90 of that 150 to 200 and in full year -- or excuse me, in financial year '21, before Christmas, we will have reduced a further 86 and 30 blue-collar workers. Now obviously, the blue-collar team of sales continue at the current levels. Hopefully, we won't need to retrench those people, and you can see that shown on the chart here. The right-hand side of this graph is showing our variable cost of freight and direct labor. And you can see that they have tracked fairly flatly with sales, which is really a result of the significant strive -- Project Strive initiatives that have been delivered through the FY '20 period that have enabled significant cost out and being able to keep those costs flat with sales despite the significant $80 million reduction in sales over the period. Moving to our network strategy. You can see here, the consolidation program is coming to an end as we're now down to 28 sites from 50 back in 2017, and we'll soon be at our longer-term objective of 25 sites for the long term. You can see that we've been able to maintain a regional presence across New Zealand. And you can also see the least -- excuse me, the lease cost have tracked down nicely from $18.4 million in 2017, which includes approximately $3.5 million of lease costs that were absorbed as part of the sale and leaseback of a couple of sites, Stonedon Drive and Blenheim that we previously sold. It's also worth noting that those lease costs -- or excuse me, those 2 sites mentioned have avoided interest costs of approximately $1.6 million that isn't included in these numbers. It's also worth pointing out that the $15.4 million will be further reduced by $0.7 million if we're able to secure sublease arrangements for some of those sites. So that would further take our savings to approximately $3.7 million versus the 2017 baseline. So annual cost reduction of $3.7 million. Moving to our sector exposure. This chart is really giving a view of our sales exposure to our key sectors. You can see on the left-hand side of the pie chart that construction makes up about 52% of our revenues in FY '20 now -- versus prior year, that's up a couple of points versus sort of 50% in FY '19. Manufacturing is flat at about 38%. That includes food and nonfood manufacturing. Retail wholesale, approximately 10% of our overall revenue mix. Moving into the market conditions that we've experienced through FY '20, we've included several key sector indicators here. You can see on the top left, nonresidential, it has been calling off for a while, and this is really driven by the slowing vertical construction. These are industry stats. There is an increase in value of nonresidential consents. But there's been a fairly significant decrease in volume and square meters. The top right, you can see the crane activity index for nonresidential has declined for the first time since 2017. In terms of our business, our composite floor decking and structural steel businesses are particularly exposed to that vertical construction segment. Our current projects are more related to infrastructure and civil sector, and we have a very healthy pipeline for nonresidential construction for both our composite floor decking and reinforcing steel contracting businesses. Residential is on the bottom left, and you can see it's been very strong at June annualized consents of $37,600. We really haven't seen the expected calling off yet in the residential sector. You can see the BNZ PMI metric on the bottom right, which has continued to climb, hitting 58.8% in July, which effectively is catching up on the declines that we saw through COVID. So it is a mixed bag, the vertical construction softening has had an impact and been painful in FY '20, but we are now seeing a good mix of infrastructure, civil and water moving forward. I'll now hand over to Greg Smith, Steel & Tube's CFO, to take us through some of the financial charts. Greg, you may be on mute.

Again, Greg, your line is open. Please go ahead. Again your line is open, sir. Please go ahead.

Okay. We've lost Greg there. He's on a separate line, so he may actually be talking to himself on mute there, but I'll pick up on the financial chart, Chart 9, group summary. You can see the revenues for the full year at $417.9 million versus $498 million for the prior period. EBIT at a loss of $57.7 million, which includes the impairments that I mentioned around -- on the previous slides. Our nontrading adjustments were $58.1 million leading to a normalized EBIT of $0.4 million versus $16 million in the prior period. NPAT, negative $60 million, driven by the noncash impairments and write-downs that we have flagged. Shareholder equity, $181.3 million. Net cash to debt, cash result of $7.4 million, as I mentioned, and net operating cash flows were strong at $39.6 million. Moving to revenue and margin slide. There you can see the impacts on sales and margin on the graph on the right-hand side, the second half 2020, the impact of COVID. And in the bottom of the chart there, you can see the split between distribution and infrastructure. So our revenue was primarily COVID impacts in the latter part of the period and the restrictions that came through with that. And we've also seen a contraction in vertical sectors and stainless sectors through the period.

Good morning, Mark. If you can hear me now, apologies. Yes. Sorry, everybody, if you can hear me now, for some reason, the phone went blank.

That's good. Thanks, Greg.

So yes. Look, I'll pick up. So apologies. As Mark noted, in terms of our operating costs for this year, so they're largely in line with the prior year. We continue on a normalized basis. So in our results, we reported OpEx of $97.1 million, but that does include $5.5 million impact from IFRS 16 and $5.7 million of nontrading adjustments, which relate to our restructuring program and some of the execution costs associated with the branch network consolidation program that Mark referred to. And I should point out that all of our normalization adjustments are included in the appendix to this presentation and also in our annual report. So on a normalized basis, largely flat year-on-year, we have incurred some additional digital and IT costs as we started to accelerate our program of investment in that space as part of our strategy to take the business forward. We did also see during FY '20, $2.7 million of additional bad and doubtful debts compared to the prior year. As you recall, in our first half year result, we flagged that we've been -- we've seen some significant losses on a couple of clients. That's, unfortunately, obviously carried through for the full year result. And the prior year was a flat number for bad and doubtful debts. And when you exclude that, our OpEx -- underlying OpEx is down slightly from the prior year as we continue to focus on tight management of costs. In terms of our cash flow, as Mark has already talked about, we've produced a strong cash flow performance this year. You'll note that throughout the presentation, too, we are giving both pre and post-IFRS 16 comparatives. So on a like-for-like basis, our operating cash flow was $26.6 million, and when you note that the prior year cash flow included a $5.6 million tax refund, year-on-year, our operating cash flow was $10.9 million better when you exclude that. And pleasingly, we've delivered a net cash position of $7.4 million at the end of the year on the back of some good working capital management. And we remain on track at this point to further pay down our remaining borrowings during FY '21. It is our objective to continue to deliver consistent high levels of working capital performance and I'll just touch on that in the next slide there. So you can see our metrics, particularly both inventory and trade receivables have continued to improve. We still feel there's further room for improvement, particularly in that inventory space, but very pleased with the progress that we've made this year in that regard, and that has certainly helped with the operating cash flow performance. Despite the higher doubtful debt impact in the year, which was associated with a small number of customers. We've actually seen an improvement on our on-time debt collection rates, and we're continuing to focus in that area. So overall, all of our working capital metrics have moved in the right direction during the financial year, as I note, that has contributed to a strong operating cash flow performance. Our capital expenditure continues to be maintained in line with depreciation and amortization. We are prioritizing allocation of capital to projects that are supporting the digital and business growth objectives. We continue to fund our CapEx through operating cash flow. That is our expectation. And during the year, we've made a number of -- some good progress with -- particularly with digital. And as Mark referred to, the customer web portal and customer segmentation work is starting to really help take the business forward. And that's certainly a key area for us as we move forward, and we've accelerated our investment in digital post COVID, so that we can really further lower our cost to serve as a business. Overall, our balance sheet remains a very strong position with the low debt, good cash position at the end of the year. We did secure with our banking partners, covenant waivers as well as revised covenants for the remainder of FY '21, which we expect to comfortably meet. You'll recall, we did make the call pre COVID, given the uncertainty to cancel the interim dividend. And in line with policy, there was no final dividend will be paid for FY '20. We will continue to monitor this as we move forward, and the Board will reassess this during in FY '21. But at the moment, we've set ourselves up well to handle a range of economic scenarios with a well-positioned balance sheet at this point in time. Just a reminder of our operating divisions. We have the 2 divisions, distribution and infrastructure. Distribution, sourcing products from preferred steel mills and selling them through our distribution network. Our infrastructure business, like manufacturing, on a project basis for customers, producing roofing and flooring products. We remain proud of our key brands, Hurricane, Fortress, ComFlor and Studwelder. And obviously, the Steel & Tube brand is a key focus for us. The 2 divisions, for the year, both impacted by the shutdown, of course as well as the softening vertical construction market and stainless steel market that we saw during the year. The distribution business has made good progress with improving underlying margins and performance with Strive initiatives and continues to target areas where we can lower our cost to serve. The infrastructure business, we've actually seen some quite strong pipeline for the rest of this calendar year. We have continued to win a number of key projects, and that has certainly contributed to the reasonably good start to this financial year against our expectations, and we'll continue to monitor that. But primarily, both business is down as a result of those impacts during the year in the post-COVID recovery period, which did see a change in mix of products, too. So that impacted margin a little bit in the last quarter as well. But as Mark's noted, our trading since June has continued to be solid as we move into the new financial year. I'll now hand back to Mark to talk about our strategy as we move forward.

Okay. Thanks, Greg. So I'll move to Chart 20, which is an orientation slide. You'll recall back in late 2017, we embarked on an extensive company-wide reset to drive long-term value for shareholders. Our strategy builds on that work, and we have done building around a stronger foundation. It captures our approach to a rapidly changing environment, and we will come through this and position the company as a highly successful business over the next few years. The strategy really brings our staff and our business units together in a pursuit of a common purpose. And that aligns with our services, our expertise, our products to provide the best possible support to our customers and partners. You see on the next chart that our strategic pillars, you'll all be familiar with, are really around key pillars. And these are, firstly, the commitment to quality, health and safety; secondly, operational and supply chain excellence; thirdly, putting the customer at the heart of our business; and last, supporting a winning team. Moving forward, you can see our purpose is clearly to make life easier for our customers, supporting their needs for steel products and services. Our vision is to provide unparalleled customer service and experience, and our goal is to position Steel & Tube as the best in the sector, the preferred choice for steel products and solutions and a trusted partner for all of our customers. Our strategic pathways are really focused around key -- 5 key pathways. The first is making it easier. So delivering the information, expertise, purchasing options and communication channels that make it easy for our customers. Secondly, to provide -- to be a full service provider. So leveraging our breadth of expertise, quality products and strong brands to deliver a group up -- excuse me, a ground-up solution for all of our customers and finding better ways of working. So continually improving to ensure that we have an efficient and effective operational platform with very strong operational discipline and customer service. Fourth, innovation and technology, really embracing new technology and continually innovating to deliver on our customer and partner strategies and really drive greater efficiencies for our partners and also ourselves. Our one team philosophy is really about aligning our staff and our businesses behind our common purpose. Investing in staff development, recognizing and growing their talents and contributions and empowering them to add value to the customer. Our strategic outlook, fairly clearly, there's a mixed bag there. I'll go through each of the sectors that we're exposed to. In the construction space, residential consents, as I mentioned earlier, do and have remained healthy. Pre-COVID-19 consents were forecast to increase by 15% through to about $27 billion by 2024. Nonresidential building was expected to peak over the next couple of years at about $9 billion in total value by 2021. We are, however, seeing a weaker construction sentiment and ongoing price pressures and headwinds in that construction sector. Infrastructure, large infrastructure projects are ongoing, and we see a promising pipeline of shovel-ready projects and also other opportunities in the energy, water and marine sectors. The government's $3 billion increase in funding and infrastructure that's on top of the $12 billion increase announced in January is certainly helpful and good exposure for our business, and we are working through those projects. And as we progress through them, we continue to see further opportunities. Manufacturing, both food manufacturing and agricultural sectors are expected to fare better as necessities and high demand locally and, of course, abroad. New Zealand's focus on the resilient local supply chains and increased domestic manufacturing may help offset some of the export-led decline. We also feel that export -- excuse me, that lower interest rates and labor market constraints are likely to see more investment in the manufacturing sector over the coming years. Rural, really changing dynamics in that sector as we move from the dairy conversions that have been occurring over some time to more maintenance programs and other opportunities. So a fairly stable outlook in that sector. So moving forward to chart -- to next Chart 25 in terms of our outlook. Post level 4 shutdown, we've embedded a number of structural changes to the business. And trading in the first quarter, particularly the June, July, August period to date, has been stronger than we anticipated, as noted earlier. We are moving ahead with a clear strategic plan. We continue to take actions to streamline the business and our operating model. We are very well positioned in terms of our balance sheet and our leaner cost structure. Our accelerated investment in the digital space is providing a critical platform to ensure ease of business for our customers. We are, however, taking a cautious approach to the future economic environment, and there's no question that careful business stewardship is required over this period. We're not giving any guidance for the financial year FY '21 just due to the uncertain impacts of COVID on trading. I'll now pause for questions.

[Operator Instructions] We'll go ahead and take the first question.

It's Steve Hudson here from Macquarie. Just a couple of quick ones from me. I just wondered if you can give us a feel for what you're seeing in the stainless steel market at the moment. It's obviously a reasonably big exposure for you. Just interested in what you're seeing in terms of current activity and investment intentions by your customers there? Just secondly, on your sort of large cost flags, I just wondered if you could give us a feel for what you're expecting your labor cost to be next year? I've got them at about $76 million this year. And also your outsourced freight, which seems to be your second biggest one at $25 million. I just wonder if you can give us a feel for where you see those 2 heading given what you've said about your rationalizations. And then thirdly, maybe just a sort of a bird's eye view of the distribution market in general. Where are we in the cycle? And how bad could it get, I suppose?

Okay. Thank you, Stephen. Perhaps I'll answer the first question and then hand back to Greg on the cost items, and I can close out with the general bird's eye view. On stainless, I mean, we -- it's a fairly mixed market there. We have seen some declines, as I mentioned earlier, just due to the general dairy conversions obviously softened significantly over the last 2 years. We are seeing opportunities in the water space. And the, I guess, rate of decline in the stainless market has kind of softened. So we are seeing more stable outlook for that business moving forward. But it's moved more to maintenance programs of different sectors where we're seeing opportunities in the stainless market. And you would see it from the import volumes of stainless, it's mostly imported product. So I'll hand over to you, Greg, on the cost side.

Yes. Thanks, Stephen. So look, in our presentation, we've noted that the timing of labor cost out, we expect to get circa $10 million out of that in FY '21. And overall from our 150 to 200 employees, circa 14% to 15% reduction at this stage from actions already taken. So that will be phased in on an annualized basis. So that's where we are with those. And on a freight basis, Stephen, look, as Mark's noted, getting -- tracking in line with our revenues and optimizing that with the branch network consolidation program and some of the other actions we are taking, we're continuing to work to lower our cost to serve. I can't give you a forecast on that, but ultimately, improving our margins and freights, one of those components of that remains a key focus for us.

And Greg, just as a quick follow-up. I know the freight is largely outsourced. Is it -- can we assume that it's basically variable? Or is there a fixed component to it?

We've got different relationships across a number of freight providers, Stephen. So I can't give you specifics between variable and fixed. But increasingly, we are looking to make it as variable as possible and work with our outsourced partners. But we -- there may be times where it's appropriate for us to agree a fixed price contract, because that's actually the more efficient thing to do. So it's a combination of the 2.

And just add to that, Stephen. We will generally tend to run by run. And obviously, line haul, we tender those. It's a fairly aggressive market and the base case. So we get good value through those tender processes. In some of our metro deliveries, we actually do ourselves, and in other cases, have partners that we've worked on with as Greg noted, variable arrangements and performance incentives that work for both companies. So -- and you'll see that flat line despite the declining sales has really come about through some of those partnerships and finding opportunities to reduce costs as we go through what has been a difficult transition year. Yes. So the last question you had there, Stephen, just around the general market. I mean, obviously, we've taken a fairly conservative approach to our view of the various sectors. And you'll have seen similar sort of commentary from other large competitors in the market. And I guess the key point is that the actuals are playing out more favorably certainly in this first quarter than what we were expecting. So we're obviously hopeful that will continue, but I think as we head into a more recessionary environment, the reality is some of the sectors, such as residential, are likely to come off a lot more than what we're seeing at the moment. But these are very uncertain times, and there are a lot of other drivers that may counter that. So obviously, we're hopeful that activity remains at the current levels.

Fair enough. And actually if I might just slip in one more, if I may. Just to comment on the BlueScope New Zealand review and whether or not you expect them to continue to operate here under the current footprint that they've got broadly speaking?

I wouldn't want to comment on supplier strategy, Stephen, but other than what they've publicly noted. We obviously source product from all over the region, and we need to do that from a price competitive standpoint in the base case. So we see New Zealand Steel as a key partner of ours and maintain significant supply lines with them, but we also are testing the market regularly regionally.

[Operator Instructions] We will go ahead and take the next question.

This is Grant Lowe from Jarden. I just had 3 queries, I'll give them to you one at a time. The first one, just I see margins came in sort of well below 20% in the second half. Can you just talk a bit about what you put this down to and how you see this coming back up going forward?

Greg, do you want to answer that one?

Yes, sure, sure. Grant, so what we saw in the fourth quarter post COVID as part of the progressive recovery coming out of level 3 and return to work, we did see a reasonable change in our product mix. So it will drive for lower margin product over that period, which just dragged the margin down for the year. I mean our -- prior to that, we're actually starting to see some improving margins come through, partly through some of the cost-out initiatives we're doing and also working on our pricing as well. So it was predominantly a change in product mix over that sort of May-June period, which brought the margin down.

Fine. And do you see this reversing going forward at sort of simple levels...

Yes. So look, we're starting to see a bounce back as we move into this year. Clearly, they had continued to be competitive price pressures, and we respond to that where we need to and focus on lowering our cost to serve as well through the initiatives that we've talked about. But our expectation is that we continue to get margins back to the levels we were seeing pre COVID and target further improvement from there.

Got it. Just in terms of -- so the further stock consolidation that we're seeing around the place. How are you sort of managing the risk or sort of further reduction in sales, particularly in the regions where you're pulling back somewhat?

Yes. Grant, it's been an interesting process. I mean, there's really only a couple of areas where we've had wholesale exits from in terms of the product supply location. Rotorua and Gisborne are the only 2 examples I can think of. And we've actually increased sales presence on the ground in those markets. And we have seen since the March -- or excuse me, the April restart at those sites that we've seen our sales increase versus prior period. So the increased sales presence on the ground, I think, has been helpful there. So we haven't seen any, I guess, impacts of any consolidation, but we've been doing most of the consolidations that we've done have been 2:1 in various locations around the country and in one location, we've swapped out a site for a small location. So we really haven't reduced our presence, if you like, in any key markets across the country. And our learnings to date have been positive in terms of, as I said, sales growth where we have consolidated.

Okay. And then just the final one on cash collection post balance date. Have you seen any change in that or any time change? And that obviously, you've got a provision, therefore, better at book debt. So I'm just wondering how that sort of things are currently tracking?

Sure. I mean those provisions are really for a couple of -- those provisions are for a couple of specific accounts, we have actually seen collections improve over the period since lockdown. And I think many companies, certainly, the listed operators are all working hard, I think, to try and increase the cash flow through the system from our clients, government clients, through to supplier payments, the small payables to make sure that there is liquidity in the system. So I think we've seen a general, I guess, industry-wide improvement in terms of the way that clients and some contractor partners are working together. So our collections have actually been very strong, but the doubtful debt provisions are for some specific provisions that we've taken.

And we will go ahead and take the next question.

It's Matt Henry here. I just had a bit of a follow-up to Grant's question on margins. Can you just give us any color around what the competitive landscape looks like at the moment? How it changed at all coming out of lockdown or even going into lockdown? And are there any areas specifically, which are you're seeing increasing pressure or lessening pressure?

Yes. Matt, yes, look, I guess, we had seen some -- in the first half, when we -- you recall, when we noted our first half results in February, we had, had a fairly tough first half in terms of that vertical construction and some softening continued in stainless. But towards the end of the first half and certainly up until the COVID hit us in that sort of -- was it the fourth week in March, we had seen some -- both revenue and margin growth. So over that sort of 4 to 5-month period proceeding COVID lockdown, we'd actually seen some improvements. And frankly, the margin environment and the core distribution markets that we operate and do need to improve. And I think as an industry, there is -- the operating margins have been too low for at least 12, 24 months. And so there is a need for improvement there. So we were starting to see that coming through in the results, certainly in that sort of period from December through to March. I think to your second part of your question, post COVID, as Greg noted earlier, we had seen some mix shifts on us in that immediate period. But we are starting to, I believe, see some improved margins coming through at the moment. And as Greg noted, we are very focused on getting our margin -- our product margins to -- back up to reasonable levels, because you can see in the cost material that we've provided in the package earlier that we've been doing, I believe, a fairly good job of driving down those variable costs. It's been making sure they flow through to gross margin through those product margins. So we are very focused around lifting those. And a key part of our digital work, it's not all customer-facing. It's -- we are building in quite rapidly standing up web stores for our customers and of course, there is a cost to serve improvement that comes with that, but a big driver of digital is really around the information and insights that we are gaining through our systems now, our [ AX ] tool is actually becoming a very strong tool for us in terms of providing a lot more insights as we put business tools on the front of that, that leads straight to pricing and I guess, governance, controls around margin that we are certainly -- I get involved with on a daily weekly basis in the businesses to help try and stem up those product margins. So that is a key focus for us. So hopefully, that answers your question.

At this time, there are no further questions. I'll now turn the conference back over to you for any additional remarks.

So thank you all for your attendance, and I appreciate the questions. Dave, close the conference call off.

Well, thank you. That does conclude today's conference. We do thank you for your participation. Have a wonderful day.