SThree plc (STEM) Earnings Call Transcript & Summary

[Audio Gap] full year results webinar. [Operator Instructions] There's PDF of the slides on the right-hand side, and this webinar is being recorded. I now hand over to Timo Lehne, Interim CEO; and Andrew Beach, CFO. Timo, over to you.

Thank you very much. Good morning, everyone and thank you for joining this call. For those of you that don't know me, my name is Timo Lehne, and I'm the Interim CEO of SThree plc. Until very recently, I was running our DACH region. And over the recent years, I was part of the senior leadership team here at SThree. With me today in the studio is Andrew Beach, our CFO, who many of you will know already. Before we go into the presentation, I wanted to take the opportunity to introduce myself and my background with the company. I'm a German national as a major. I studied business management in the Netherlands before joined SThree in our business in Munich. At that time, I was one of our first ever employees in the DACH region. In 2008, I was asked to build [indiscernible] the business, where over the next 4 years, it became the single biggest revenue contributor in the DACH region. And as you're aware, the DACH region was and remains the powerhouse of the group, accounting for [ 38% ] of announcement. Following this, I was asked as a Senior Director to scale our over-contract business across DACH and set the foundations for our ECM model in Germany. In 2017, I was promoted to Managing Director of the overall DACH business, which now represents more than EUR 500 million in revenue and over 1,000 employees across 10 offices. I deeply understand the market we operate in [indiscernible] and this company. I have a proven track record to scale businesses in different jurisdictions and across term contract and ECM. And I'm very excited and confident about the future of SThree. I feel immense privilege in leading this company as an interim CEO, continuing to deliver against our strategic [indiscernible] [indiscernible] create value for U.S. We haven't have [indiscernible] level and the right phase that has enabled other headwinds such as COVID-19 pandemic. Together with my senior colleagues, we have been extremely focused in delivering the results, which we are announcing today. It's a record financial performance. As a quick reminder, shape of our business that you will now be familiar with from previous announcements, our strategy is positioned at the center of two long term secular trends, both STEM and flexible working with a unique global footprint. And to be clear by flexible working, we mean the short- to medium-term independent contracts or employed contractors that are often needed to be filled by highly skilled specialists in technology, life science and engineering. Why do we think it's important to be at the center of these mega trends? Well, to share 2 quick reasons facts with you according to PwC, 53% of people think that technology is need breakthroughs will transform the way people work over the next 5 to 10 years. In the World Economic Forum this month stated, that they think over 97 million new jobs will be created by AI and automation alone by 2025 is the center of this global demand. Hopefully, the press release and documentation earlier this morning, 2021 was a record year with a record performance, not just in comparison to 2020, but also against our previous record year in 2019 which pre-COVID. This year, we delivered over GBP 1.3 billion [indiscernible] increase over 2020, but also up [ 3% over in 19. ] And we will take you through a bit, but I must say that [indiscernible] growth irrespective of operating during a pandemic. We set out a number of strategic pillars in 2019 so that we could comment on our progress relative to our position, platform, market and people. In the last year, I'm delighted that we have continued to drive scale in our 5 core markets is Germany, [ Netherlands], U.S., U.K. and Japan. We have maintained discipline in investment decisions and prioritized capital for most rewarding markets. We have ramped up our internal capability for managing our technology and operational estates, which now includes the formal appointment of Nick Folkes our first-ever dedicated CTIO for the company. Nick brings significant experience of developing and delivering sizable IT infrastructure and transformation programs. And given our focus on flexible working with ECM and independent contractors, we're enhancing the platform and taking the best of the best from our core markets and applying it across the group. In all markets, we continue to take market share in addition to growing areas with clients related to sustainable supply chains such as in our renewable energy business. Finally, but one of the most important pillars is our people. We are continuously reflect and adjusting our approaches to attract and retain great people in this global war for talent. We put in place a 5% spend on learning and development. We introduced a new digital learning system, which takes the best of our internal content and the best of market standards through companies like LinkedIn. Shortly introducing a new global onboarding and training program, which is virtual and in person to help our new recruits become as productive as possible. And finally, we have refreshed our employee feedback approach and are moving to the best-in-class standard of tracking hotspots on a quarterly basis. Connected to our purpose and strategy is a strong emphasis on our ESG commitments. We believe in empowering a sustainable future through promoting green jobs, promoting diversity in STEM and contributing to the renewable space. Internally, we're also reducing our own carbon emission and improving our female representation at senior levels to 50% by 2024. We are particularly interested in supporting engineering and tech roads in the green job economy. These jobs are not only highly in demand, but will be a massive area of growth. And don't just believe me, I believe the biggest investor in the BlackRock "Larry Fink" and from his 2022 CEO letter where he says engineers and scientists are working around the clock on how to decarbonize cement, steel, plastics, shipping, trucking, aviation, agriculture, energy and construction. Then he says decarbonization of the global economy is going to create the greatest investment opportunity of our lifetime. And finally, he says the decarbonization of the economy will drive enormous job creation. As [indiscernible] purpose, strategy and positioning ensures we are not only ready for these changes in the market, we're also perfectly positioned for these major shifts in the provision of core talent and skills, which are desperately needed for the net 0 transition. Finally, before I hand over to Andy, I would like to share a few examples of our purpose in action illustrated by the clients and candidates we serve. First, in the renewal space is Schneider Electric, who we help not only get the right team, but also help them hire the first-ever senior woman in an engineering role. Second, is a major [indiscernible] where we placed nearly 50 people to help them scale for major clinical trial for COVID vaccine. We're very proud of this work and this client. Finally, engineering in the U.S. is an example of where we perfectly placed to solve problems faster. For energy, a global leader in sustainable solutions, we got them the right team extra fast on a solar project in Texas, so they could deliver on time, which otherwise would have been not as successful. With that, I will hand over to Andy to take us through the details on our financial performance.

And Great. Thank you very much, Timo, and good morning, everyone. I thought I'd start by taking a quick look back over the last 3 years. FY '19 was, at the time, our record ever performance. Whilst FY '20 was hit by the pandemic, the impact on our top line performance was relatively shallow. We've bounced back quickly in FY '21, helped by the market recovery and returned to year-on-year growth from Q2, delivering 3 consecutive quarters at more than 20% growth. More importantly, we returned to pre-pandemic levels very quickly delivering growth on FY '19 as early as Q2. And as Timo said, this resulted in another record year with 3 upgrades in the last 6 months beating the FY '19 performance of both net fees and operating profit level. We are less cyclical due to our strategic focus on STEM and flexible working. Our experience with the pandemic has proven that we are less volatile through a period of market disruption and this confirms our strategy as right and of the high quality. Looking in more detail now at the full year FY '21 performance. We've delivered a year-on-year net fee growth of 19% [indiscernible] was significantly impacted by the pandemic, [indiscernible] which also presents up [indiscernible] versus 2019 pandemic. That's [indiscernible]net fees are up 9%. Operating profit has more than doubled year-on-year and it was up [ 7% ] through [ FY '19. ]. Our conversion ratio, the ratio of operating profit to net fees is 17.1%, up 7 percentage points year-on-year and broadly flat with F '19. Profit before tax is GBP 60 million again more than double year-on-year. Our effective tax rate returned to a more normal level of 30%, down from a high of [indiscernible] last year, and this gives a profit after tax of GBP 42.1 million. I'll now go on to talk about some of the key drivers behind this strong performance. We have seen very strong demand in the STEM sectors that we exclusively focus on. And of course, we're also benefiting from the broader improvement in the recruitment market. Compared to last year, the permanent business has led the recovery as expected. Permanent represents just 25% of our net fees, but was up 24% year-on-year. Contract, which represents 75% of net fees, saw a growth of [indiscernible] year-on-year. Compared to FY '19, we delivered 9% growth in our contract business and 8% growth in our permanent business. We're also benefiting from the continued trend towards flexible working. Whilst we'd expect the permanent business to rebound more sharply, our focus on contractor business delivered a more sustainable revenue stream and a higher value across the length of the engagement. This slide looks at the analysis of net fees by product type. As I mentioned before, 75% of our business comes from contracts. This can be further split between independent contractors and employed contractors. The most notable shift over the last couple of years has been the trend towards the employed contractor model, or ECM, which has grown from 23% of net fees in 2019 to 32% of net fees in 2021. That's an increase of 28% year-on-year and 41% since 2019. ECM is the predominant model in the U.S. and is fast growing across Europe. Turning now to the regional and sector split for the year. We have a well-balanced business both geographically and by sector. On the 2 charts you see here, the outer ring represents 2021 and the inner ring represents 2020. The first chart shows that 97% of our net fees come from our top 3 regions. DACH, as Timo mentioned, represents 36% of the group, up from 34% last year and this growth was largely driven by Germany. EMEA, excluding DACH represents 36% growth down from 38% last year despite an increase in net fees and the growth here largely driven by the Netherlands. And the U.S. represents 25% of the group, consistent with last year, but with a significant growth in net fees. The second chart shows our strong and unique position and providing them skills. Technology is our largest sector and it represents 47% of net fees and Life Sciences represents 24% of net fees. Our year-on-year growth is driven largely by DACH and the U.S., both up 24%. You can also see that most of this growth is driven by the Technology and Life Science sectors with year-on-year growth of 23% and 25%, respectively. We've seen some improvement in our margins over the last couple of years, Contract margins expressed as percent of revenue are up [indiscernible] percentage points compared to last year and up 1.2% from the year before. Our permanent margins, which we address as a percentage of the candidate are broadly flat year-on-year, but up slightly compared to FY '19. We have also benefited from wage inflation. The average salary of contract placements increased by 4% and on the permanent side by nearly 5%. Activity levels are the highest since 2019 with contractors working longer hours. This coupled with the fact that the increased demand has been delivered with lower consultant head count results in exceptional levels of productivity. We've also benefited from the shift towards ECM as well as new tools and processes that we've introduced to more carefully managed shrinkage. The measure of productivity being net fees per head increased by 31% year-on-year. These levels of productivity are not sustainable and we do expect them to revert to some extent. However, we do expect to maintain some of this productivity gain long term. Turning to the year-on-year operating profit bridge. You can see the strong increase in permanent and contract fees, just over GBP 47 million in total. People costs are up year-on-year and that's despite the fact that our average headcount is down. This is largely driven by increased bonus and commissions to reflect the significant improvement in performance. Taking into account net savings and other costs, we see a high drop through of over 60%. Looking at our net cash position, we have delivered a 15% increase despite the additional working capital required to fund new contractors. Over the last year, we have added over 2,000 contractors taking our total active contractors to record levels. The consumption of working capital to fund these new contractors required cash of approximately GBP 20 million. But the underlying profits of the group together with very strong management of other working capital, including debtor collection and supplier payments has more than compensated for the required funding. Moving on now to look at EPS and dividends. Profit after tax is up 129%. The number of shares is broadly flat year-on-year, driving an earnings per share increase of 129% to 31.8p. I'm very pleased to announce our final dividend of 8p per share, bringing our full year dividend to 11p. This is more than twice as high as 2020 and in line with our dividend policy. Looking now at the future visibility of our contract business. The contract order book represents the value of contracts written up to the contractual end date, assuming that all contracted hours are worked. We have seen further growth in the order book, up 43% versus the same time last year and up 30% on the same time in [indiscernible]. Within the order book, the employed contractor model ECM was the main driver of the growth. Our expenses over the last 2 years supports our ambitions around growth and market share. We remain committed to our operating profit conversion ambition and this ambition was supported by client investments in systems including CRM and ERP. The original plan was a multiyear implementation resulted in a smooth margin impact. Our plans naturally adjusted during COVID, and this results in a more concentrated cost profile. Whilst we still expect to deliver strong net fee and profit growth in FY '22, it's likely to hold our margins closer to those delivered in FY '21. We anticipate margin gains to resume from FY '23. The anticipated income statement impact of investments in FY '22 is in the region of 1% to 2% of net fee income and the current market consensus already captures the full impact of these investments. So to sum up, reporting a record trading performance for the year, we delivered strong growth in net fees across all geographies. The contract order book continues to grow given increased visibility of fees and we have -- thank you. I'll now hand back to Timo.

Thank you, Andy, for that comprehensive overview of our results. Before we move to Q&A, I would like to summarize a few areas. In 2019, we stated these 4 ambitions. And as we all know since 2019 the world and how we operate our business has changed a lot. However, we have made great progress in some areas and we have still got some work to do in others. Market share. We're really happy with our progress. We are committed to driving [indiscernible] and our own track. Cash reserves, we are very comfortable with this especially since the independent contracts and employed contracts has grown much and is [indiscernible]. People and society, we have done so much internally to help our people grow and our productivity is at all-time highs, which will remain a core focus. Looking ahead, I would like to offer some high-level views from our [indiscernible]. We recently spoke to 5,000 candidates globally about what they see in the coming year and the future of work. Our candidates have a very positive outlook, 66% expect to see more demand in the coming months. That tell us there's even more demand for growth in ICT, health care, life science and fintech growth. And finally, we're expecting from our service a higher desire for stem specialists to work in flexible contractual work models like independent contractors [indiscernible]. This combined with the overall [indiscernible], we are operating in shows that SThree has the right position to drive further success in the up coming years. Finally in closing, I would like to add a few things. moving into 2022, we are now focused on investing for our future and long-term sustainable growth especially on group-wide solutions for CRM back-office technology, [indiscernible] in more markets and investing in our people. And two, we are in the markets with the right strategy at the center of 2 secular trends of STEM and flexible working. As we laid out in our strategy, there is an increase for both STEM specialists and flexible working specifically with independent contractors and the employed contractor model. There's no question that between the green jobs economy that I touched on earlier, supported by major investors, governments and the massive shift in society around areas such as digitalization mean that science, technology and engineered jobs are extremely high demand. SThree is perfectly positioned to help find this talent globally. Internally, we're putting in place the right culture, benefits policies such as permanent hybrid working models to enable us to attract our own diverse and top talent. And we are extremely focused on continuing to drive the group forward towards our long-term ambitions both through what we do and how we do it. Finally, we have delivered record performance and are forecasting double-digit growth on net fees and profit in 2022. It has been a privilege to be able to speak with you all today. And Andy, I look forward to your questions. Let's now move to the Q&A part of the meeting. Thank you.

[Operator Instructions] And we'll go to Adrian Kearsey at Panmure Gordon. We'll move to Sanjay Vidyarthi from Liberum.

A couple of questions from me. First one is you talked about the IT investment program having been a multiyear program previously. And obviously, I think you're accelerating that slightly. So within the numbers you've given, is there -- have you included something for potential disruption? And just an idea of how the implementation will progress and mitigate any kind of risks in terms [indiscernible] might be quite a significant IT program? The second question is just to understand where we are in terms of the cycle in various segments of the business. Obviously, Life Sciences and Technology, I think, very strong. Are there other segments where you're potentially seeing the peak and shifting out of particular markets or subsectors.

So Sanjay, I would start with the second question first and then hand over to Andy. In regard to the cycles, yes as indicated, IT and life science are in particularly strong throughout the the last 2 years. But also what we're seeing is quite some hotspots around the renewable business and also positive signals for the Construction & Property business, which we have. Obviously, within IT and Life Sciences are different [indiscernible], which are seeing increase in demand on our teams for example, data, AI, cybersecurity is of course a very big and hot topic. But Andy, if you can jump on the first question around...

So questions around the IT estimates and I guess, the risk of disruption and an intense IT program in a short period of time, which is a fair question. First of all, I think it's probably worth pointing out that we haven't stopped investment through the period. So we have continued to invest in IT, infrastructure, systems, data throughout COVID just not at this sort of level. And actually, we're seeing some of those benefits coming through already. I think I mentioned earlier, our investments in technology to help us manage shrinkage better. So that's actually helping make our consultants more productive with the tools and systems that we've already put in place. It's right that we are kind of concentrating the investment over a shorter period of time. I think the plans are near finalized and well based. Nick, what we mentioned earlier is leading this program. So we have an expert in implementation and he is supported by a strong team to implement those systems. I think what we're saying is that we're working towards our ambitions that we set out a few years ago through to 2024. I mean, we're confident that we can deliver to those ambitions. These investments will help support that. I mean we have baked in a natural element of prudence let's say in the expectations of the returns. We can talk more about that in a few months' time [indiscernible] about return levels we expect. But we've modest returns and it comfortably beats our kind of internal investment hurdles. So we have been fairly prudent on the upside that we expect to deliver from the investments in the next couple of years.

And we'll go to Steve Woolf at Numis. Oh, he's just disappeared.

Maybe we could try Adrian again

Adrian has not put his hand up again [indiscernible] enough. So we will go to -- oh, Steve is back again. Steve, do you want to unmute yourself. Steve Woolf from Numis.

Two then my side, the contractor order book you mentioned as sort of increased fairly significantly. Is that skewed to any particular areas? And I think you might have put it on the slide, but I think I might have missed it. Was it the lengths of the contracts that's now giving you that better visibility as part of that. But that's a question really on skewed to any particular areas. And then to add to sort of Sanjay's question on the IT investment plan. What are the aspects that have been brought forward that would have been smoothed previously that gives you the confidence that you can add on systems quite quickly rather than having to take 2, 3 years over it?

Yes, sure. So the first question was around the contract order book. Well, first of all, it's -- actually it's widespread. So it's growth through largely U.S., Germany and Netherlands, regionally. And sectorally, it's mainly Technology, Life Sciences and Engineering all of them are seeing quite significant upticks. More of the growth is towards ECM, but independent contractors and ECM are both up quite significantly skewed towards the ECM looking out. I think you asked a question about some of the drivers behind kind of the breakup of the elements of the contractor order book, it's actually both. The length of the contracts has increased or the average length of the contracts contained within the contract order book has grown and also the individual values and contract sizes have grown. So it's a little piece it's a bit, it's time and value. So I think that's your first question. Your second question was on the investment again, the concentrated period. Just to be really clear, the investment is not just a 1-year investment, it's actually over the next 2 or 3 years. We will be focusing starting the major projects on, for example CRM and ERP in this year and focusing those in the areas of the business where we feel we can get the best benefit from first, there will then be a rolling program. So it's not the case that we are delivering everything in a really short space of time. Anyone who knows these big projects, they bear a multiyear project. So it's on a very -- it's a sensible rollout program projects expect some of the benefits to be coming through years to come way beyond our FY '24 ambition period. So you should see continued growth in margins beyond that period. So it's a sensibly managed projects with focus in the earlier years on the markets that it really impacts most notably. And I think U.S. is a key focus for us, for example.

We'll go to Keith Hiscock at Hartmann and Co.

Can I ask you a couple of questions. The first one is about what's driving the growth in the share of employed contractors, what's in it for the customers? And then secondly, if you are able to share the difference in the margin between employed contractors and independent contractors?

I will start off with the first one [indiscernible] second one to you back again. So Keith, definitely the question I expected. there are 2 natural drivers. Number one, we're seeing [indiscernible] -- and from a governmental side point of view, preferred to scale you because obviously, there are wider benefits to governments to have increased ECM models. On the other side, what we're seeing as well for customers, it's a very compliant solution. As Andy indicated the U.S. is a country where we are predominantly ECM. But in some other regions like, for example, Germany, we're seeing increase of ECM. Why we're seeing an increase of contract? So that goes very hand in hand with the trend we have indicated today as well. There are quite a lot of specialists, who actually attracted by this more flexible approach of working. Andy, on the margin?

Yes. On the margin point, we don't disclose information on profit margins. But what I can share with you, Keith, is on the net fee margin. So earlier, I mentioned that our overall contract business margin was 21.5%. That is actually higher within ECM as I think we've previously stated, it's around about 40% higher margins at the net fee level. However, the average salary of ECM candidates is lower. So there's a little bit of a net out in terms of higher margins, but lower salaries. But net, it does generate a higher income for us from the ECM model. But the thing you do need to bear in mind in the cost basis, there are additional costs within overheads to help service because it's a more full service offering as an employee on our books. So it actually costs more. So the margins would be impacted to some extent by the extra costs. But at net fee level, it's a higher-margin business.

And we'll go to [indiscernible] do you want to unmute yourself? Oh, you've just disappeared. We'll go to Melwin Mehta Sterling Investment Management.

Is that Tamjin?

Yes. Yes.

Tamjin, you have surprised me by being here, but good to hear your voice anyway, speak later. Tim, Andy, shareholder here, very good performance. I think the market is playing out understanding the business properly. But I've got 2, 3 questions. First, is in terms of our own employees, what has been the salary increase? And what has been the attrition?

So salary increases have been pretty much dependent on the local market. So we're pretty much following local inflationary rises within our markets. Churn and attrition actually interestingly it slowed down during the heightened period of COVID, and people weren't generally moving around, so it actually reduced quite a bit. Coming out of COVID, the other side, where it's slightly high. So I think we'll be publishing in the annual report in a few weeks' time, we're around about this 40% level on churn, which is a little higher than pre-pandemic. But I think some of the things that Timo mentioned earlier, we're focusing on helping to improve our employer value proposition to try and retain people. But yes, it's around about 40% churn. But on salaries, pretty much inflationary rises depending on the markets that we're in.

And Timo, have you taken any initiatives to reduce that figure?

Yes. Obviously, I mean next to the introduction of our hybrid working policy, next to the fact that we are continuously working on our core geographies on our overall employer value proposition, we've spent quite a lot of money on the overall investment around training and learning. And I think that also on the fact we saw we are able to make our staff quicker productive and over more productive. That was always a key ambition and will remain. And next to that obviously the bigger investment is, we're doing now around our systems and structures are supposed to help all of that.

And we'll go back to [indiscernible].

The 2 questions for me, if I can, possibly. Firstly, just to obviously been a bit of discussion around ECM this morning, but just to get a bit more color on that [indiscernible] announcements you've referenced the quite a substantial increase in the share of the German business represented by ECM in FY '21. And I was just thinking if we look across all of the other territory, key territories outside of the U.S., which of the territories were ECM feels that it has the sort of the very short-term attractiveness in that regard. Second one is just on sort of head count expectations for FY '22. I think previously you've sort of indicated a sort of double-digit expectation around headcount growth in FY '22. I was wondering if you could provide us a bit more color about the breadth of that across the group, whether it's going to be localized across certain markets?

I would start with the first one. So outside of the U.S., we see a relatively strong ECM model in territories like Netherlands. We feel that even the U.K. is going towards kind of alike version of ECM not completely like that? In Switzerland, not one of our biggest territories, but that's also more ECM-oriented and yes overall, that trend is something we are following and we have actually expected over the last years. That's why I also indicated for example, 4, 5 years ago, we started in Germany, actually putting the foundations in place and actually market is behaving as we expected.

Ian, on headcount. So we made good progress in H2. So we increased 9% from the half to the year-end and ended around 2,700 heads. You're absolutely right, the aim over the next year is double digits, so around 270, 300 heads is our target. Absolutely right, we are targeting that to where we feel there is the most demand or the most benefit. So that will be skewed to some of our larger markets, so for example, U.S., Germany and the Netherlands.

And we have a question from Adrian Kearsey from Panmure Gordon, who says we have seeing other recruiters highlight technology as a key growth trend. Given the attractive dynamics of STEM, are you seeing a notable change to the levels of competition for both candidates and consultants from other recruiters?

I think that's a question for me. I would just like to double check. Are we talking about technology as a market or more from an internal perspective, Adrian?

He could talk in the question. I mean you can answer both.

Okay. I will try to give both. So first of all on external side, I think we have clearly indicated [indiscernible] several years, our biggest market. And actually, the one we are investing most in from a pure market perspective, because we know that with all of the trends are also in [indiscernible] we have seen -- we are seeing for the future, that we believe the digitalization, automation is just going to drive [indiscernible]. On the internal side, I think absolutely IT and the systems we're working with are pivoted. And as Andy indicated, we're doing all of the investments we have announced or we are announcing kind of not only for our 2024 ambition, but also more also for the long-term sustaining the growth of the company. And we see that as a pivot piece as an employer offering in order to attract, retain great staff, but also obviously to make them more productive and more successful. I hope that answered your question.

And Anthony Boon from Stapleton Capital asks could you give more detail on 2022 to 2024 margin guidance?

Yes. Sure. So yes, so what we have said and you'll see from the house brokers today that because of the investment in the CRM and ERP tools for example, we're looking to drive flat margin or the margins will be flat in FY '22. That's about by a 1 or 2 percentage points. So there's an indication that were not for those investments, our margins would have been higher in '22. We still hold to our ambitions through 2024, which was in the previous range of 21 to 24. I can't give you that number. I think we're -- I think the house broker guidance is somewhere around about the 18% mark in FY '23. So the journey is it is fairly hockey stick because of the investment of the investments, but we're looking kind of flat across around the 17% mark up to 18% and then moving up towards our ambition range in 2024.

And we'll go to Alan Clifford from Lazard. Alan would you like to unmute yourself.

Yes, it was a slight follow-up on the question just, you Just answer that actually. In terms of the goals that were set at the Capital Markets Day, I'm conscious, Andy, that you weren't there at the time. So I mean, given that you've had time to audit those. I mean you just commented on how you see that hockey stick. But are you both still confident about sharing those as targets? And are they stretch targets? Or are they a realistic target in terms of how you think the business model is going to emerge?

I can start off this, So they're absolutely our direction of travel. That's definitely what we can say, Alan. And we are continuously pursuing them. Obviously, as they have been set as you said yourself, pre-pandemic there are definitely remain under constant review, I would say. So as long as they're there, we are now committing and we drive business towards them. But obviously, we adjust as quite a few of them, I think especially if you look around the ESG commitment, et cetera, we're actually overachieving and is it right to keep them? That's obviously a question where we're discussing. Andy?

No, nothing to add to. That's what I'd say. Alan?

And then just 1 follow-up on the dividend, when you look at the capital requirement I guess, the high capital requirements you now have. Do you feel -- and again, maybe just a question for Andy. But do you feel comfortable with the payout ratio? Or do you think that, that can be reviewed as the -- as you get through the current CapEx cycle?

Yes. I mean, Alan, I mean, dividend policies are always under review, but I'm pretty comfortable with that range at the moment. The idea is that, that 2.5 to 3x is a sustainable level through cycle, actually also gives us the headroom to make the investments we want in the organic business as well. So as we say here today, I'm pretty comfortable with that as a sort of a short, medium-term range on the dividend payout.

And that's the end of question-and-answer session. Would you have any closing remarks.

Thank you very much for attending today. We would round up now and actually just indicate [indiscernible] in Q1 in March to give you a Q1 update. Thank you very much, everyone, and have a great week.

Thank you very much, Timo and Andy, thank you all for joining. This is the end of the webinar.