The Weir Group PLC (WEIR) Earnings Call Transcript & Summary

Okay. It's just gone 2:30. So if we're ready to begin, I would like to welcome everyone, and thank you for joining us at our Capital Market Spotlight event. Great to see so many of you here in person, and I know we have a number of people from around the world joining us virtually. So welcome to all. Before we start, I draw your attention to the usual cautionary notice on forward-looking statements. And for those of you in the room, just to start with safety and a few housekeeping points. The fire exits are outside on the right, if you follow the green running man. There is no planned alarm. So if one sounds, please follow the instructions from our hosts here at the LSC, and can I please also ask you to put your mobile phone on to silent for the duration of the event. So today, I'm pleased to announce a new operating margin target for Weir of 20% in 2026. In this presentation, we'll outline how we'll achieve this by capitalizing on growth opportunities from smart, efficient and sustainable mining and by delivering on our Performance Excellence transformation program, where we're updating our 2026 cost saving target to GBP 60 million. We are extremely confident in further expanding our margins and in setting this new target because of 3 key factors: we are a global mining technology leader, our unique combination of world-class engineering solutions and intensive aftermarket support deeply embeds us in our customer operations. We have a differentiated value proposition and the barriers to entry to high; secondly, the long-term trends in our markets are highly attractive. The world needs to significantly increase the production of critical metals to enable the transition to net zero. And in parallel, our customers must adopt new technologies to extract and process those metals in a more sustainable way; and third, through Performance Excellence, we have a clear pathway to optimize and transform our business, creating a lean and efficient Weir, reducing our cost base and driving margin expansion. We've already demonstrated a strong track record of delivery post our portfolio transformation. And that's why the value creation opportunities for Weir is so compelling. We have a world-class business, we're playing in attractive markets, and we have a strong self-help component to our strategy. We are, therefore, further strengthening our commitments to delivering excellent outcomes for all of our stakeholders. We're retaining our commitment to grow faster than our markets, delivering compounding mid- to high single-digit organic revenue growth through the cycle. We'll continue to expand our margins after delivering the 2023 target of 17%, achieving a full year operating profit margin of 20% in 2026. On returns, we'll cleanly convert our earnings into cash with 90% to 100% free operating cash conversion in 2024 and beyond, and will deliver further growth in our return on capital employed. We will remain highly resilient as we always have been, given the benefits of our aftermarket-focused business. And we'll achieve these outcomes while continuing to deliver for our people and the planet with our technology strategy, accelerating the transition to more sustainable mining and continue action to reduce emissions and environmental impact in our end-to-end value chains. And as we deliver on these commitments, our ever-strengthening balance sheet will give us optionality, enabling us to take action to prioritize growth in TSR, balancing investment for growth with dividends and special returns is appropriate. So with that introduction, the agenda for the rest of the session is focused on how growth from smart, efficient and sustainable mining and the outcomes from Performance excellence will deliver our growth margin and cash commitments. I'm going to start by giving a group-wide perspective, and then Sean and Andrew will drill into further detail for each of ESCO and Minerals, respectively. I'll then return with some closing remarks before we open up the floor to Q&A. For those of you attending in person, there will also be an opportunity afterwards to mingle and ask further questions informally of the team. So let me just start with some context. Weir has been on a multiyear journey to sustainably higher margins, and we've made great progress. Through our portfolio transformation, we expanded our presence in mining, and exited our lower-margin cyclical businesses. This gave us a strong and stable platform from which to build. And since completing the portfolio transformation in 2021, we've executed strongly, realizing operating leverage and benefiting from system and process efficiencies, which helped us expand margins to 16% in 2022. And as we close 2023, we're on track to deliver a further 100 basis points of expansion and to achieve our previous medium-term operating margin target of 17%. But we have always said that won't be the end of the journey. And as I outlined earlier, today, we're setting a new 2026 operating margin target of 20%. We'll achieve this firstly, from operating leverage as we grow, which conservatively, we expect to deliver a further 100 basis points of expansion. And secondly and more significantly, by taking action and delivering on our Performance Excellence program, where we're upgrading our target to GBP 60 million of savings by 2026, which is around 200 basis points of margin expansion. And what pleases me most about much of the margin expansion target is that it's within our control as we optimize the platform with the growth assumption at the lower end of our through-cycle guidance. So despite some of the wider geopolitical and macro uncertainty, it's clearly deliverable, and we've demonstrated a clear track record of consistently strong execution over the past few years. So let's just look at the growth prospects and performance excellence in more detail. And this slide sets out the framework we're going to use for the rest of the presentation. It outlines the 3 factors which underpin our growth trajectory: firstly, the structural drivers in our markets; secondly, the compounding nature of our business model; and thirdly, our technology-focused growth initiatives. And the effects of this growth will then be boosted by Performance Excellence as growth and margin expansion compound over time, all of which presents a compelling value creation opportunity. So turning to the first element of the framework, which is our markets. Across all of our main commodity exposures, we see strong end market growth drivers, which are incentivizing our customers to maximize ore production which in turn will drive strong demand for our mining equipment spares and expendables. The impact of electrification and the corresponding significant increase in demand for copper to achieve net zero is well understood. And this carries across to the battery metals, too. Gold continues to be the wealth safe haven of choice and central banks continue to grow their reserves. We're at GDP growth and the continued emergence of the middle classes also provide solid long-term underpins. The outlook for core iron ore demand is solid, driven by population demographics, but the big positive though for us here will be the growing demand for higher grades needed for the production of green and blue steel. This will mean more magnetite production requiring more processing and robust demand in the low-cost regions, such as Brazil, and Pilbara in Western Australia, where we have the bulk of our exposure. And we shouldn't forget that many of our smaller exposures also have great long-term prospects, too. For example, high-grade mineral sands, supporting the tech sector and the phosphate and potash that will be needed to support our ever-growing population. So as it stands today, our commodity exposure mix is in great shape, with strong fundamentals across all the portfolio. As we look further out, we expect electrification to be the trend which will accelerate things. For example, take copper, an electric vehicle requires around 4x as much as a conventional car, and that's before we talk about infrastructure. Many countries are starting to realize that our electric -- electricity grids are going to be completely inadequate to distribute power from renewable resources to where the consumer needs it. So the world is going to need a lot more copper, with the general consensus being that supply needs to more than double in the decades ahead. That will require major investment in new mines and capacity expansions as well as other potential sources. And that will be the case right across the spectrum of battery and electrification metals, creating a strong tailwind for Weir in the years ahead. accelerating growth in these parts of our business. And that, over time, will make them a larger overall component of our mix. This is going to require a lot of investment, and it's encouraging that we are starting to see some policy response from governments in the form of critical minerals policies, but more support is needed to get the permits and finance in place to deliver it. Our job at Weir is to bring forward the technology that will enable this to happen. So in parallel with production growth, it's essential that the mining industry adopts more sustainable extraction and processing techniques in order to secure the social license the industry needs to deliver these vast amounts of energy and water and create lots of waste. So for the industry to have the environmental and social license to operate and to get permits for new mines, things need to change. To contextualize the scale of the opportunity and zooming in on this chart to where Weir equipment is used in the mine, we can see that we operate in the parts of the value chain where most of the potential for change exists. In extraction, typical ore grades in the new copper mine are around 1%. So 99% of what's being moved and process is waste, consuming huge amounts of energy and water. In comminution, the process of making small particles out of large rocks, the industry consumes a staggering 3% of global electricity each year. In the Mill Circuit, the processes by which material is graded and classified are traditionally very imprecise and lacking in dynamic control, meaning there's a high recirculating load and yields are much lower and cost per tonne much higher than they could be. And lastly, Tailings, it's the biggest waste stream on the planet. Over 19 billion cubic meters of Tailings are produced each year. Huge volumes of material being transported, processed and stored, much of it inefficiently and occasionally, unsafely. Put simply, there's a huge imperative for the mining industry to scale up and clean up if it's to deliver the resources we need to inhibit global warming. This industry imperative creates a compelling twofold growth opportunity for Weir. First, we're going to be the beneficiaries as ore production expands and investments in new projects are made. And second, we have technology leadership across the areas of the mine, which I just described, positioning us to be at the heart of the transition to more sustainable mining processes. And against both of these opportunities, Weir has the right to win. Today, our core products already have both economic and sustainability benefits relative to competitor solutions. Our superior weir life mean they last longer and need to be replaced less frequently. However, through increased R&D investment, we are differentiating ourselves even further, developing new solutions focused on addressing miner's biggest sustainability challenges. And when packaged together right across the mine, these solutions will deliver compounding benefits. Our digital insights ensure processes are optimized, which together with our sustainable hardware solutions, will significantly reduce energy and water consumption and create less waste. These solutions are set to be key growth drivers for Weir in the years ahead and will further expand our technology leadership. Later in the presentation, Sean will go into more detail on what we're doing in extraction with ESCO and Andrew will explain the role of minerals in the processing plant. But across the mine, it's our differentiated technology, which underpins the next element of our growth framework, which is our compounding business model. In mining downtime is the enemy of our customers. If unplanned, it can cost millions of dollars per day in lost production, and that's cash that's gone forever. And while the abrasive nature of the mining process means equipment does wear out, customers want the premium solution. They want the solution that is the most reliable and has the longest wear life because this minimizes downtime and delivers them the lowest total cost of ownership. This is Weir's differentiator, mission-critical, highly engineered equipment, which has the longest wear life, coupled with global wraparound sales and service. This provides a significant barrier to entry, and that's why we capture more than 90% of our global aftermarket opportunity. Customers trust us, we are deeply embedded in their operations and we're available 24/7, 365 days a year, helping them with their biggest challenges and keeping their operations running whatever happens. This supports our aftermarket-focused business model with each piece of original on average across the business, 30% of its original value in aftermarket spares revenue every year. So the GBP 600 million of OE will sell in 2023 generates GBP 200 million per annum of aftermarket revenue as it comes online over the years ahead. Fundamentally, this drives sustainable compounding growth for Weir and clearly differentiates us from our peers. And I don't think that's quite fully appreciated. So I want to explain in a bit more detail. Original equipment, fee accounts for around 20% of our annual revenue. And while the gross margin tends to be relatively low compared to the high-margin aftermarket. Our installed base is, therefore, 1 of our biggest assets. It fuels our aftermarket powerhouse, and our boots on the ground service approach is how we fiercely protect it. But we're also focused on growing it and do so throughout the mining cycle. Even when large projects are slower by providing debottlenecking and small brownfield expansion solutions to existing mines. Put simply, more OE means more high-margin aftermarket on a recurring basis. And then when you put together that installed base expansion alongside all production growth, the effects of declining grades and pricing, you start to see why we can consistently deliver through cycle growth of mid- to high single digit. Today, approximately 80% of our total revenue comes from the aftermarket. It's driven by nondiscretionary spend on spare parts, parts which are essential to keep mines running. So if you can understand those drivers, you can see why our growth is predictable and sustainable. And here's our aftermarket growth algorithm in action with the graph showing the 7% compound growth in our Minerals aftermarket over the last 12 years and ESCO growing at a similar rate since acquisition. As already reckoner, that corresponds to an ongoing growth rate in the aftermarket, around 2x higher than that of global ore production growth. It also underpins through-cycle mid-single-digit growth for the whole Weir Group. We've shown you this chart a number of times, but in the latest version, we've added how commodity prices have moved over time, illustrated by the blue line. And you can see that throughout various market cycles, including the global mining downturn, which saw CapEx fall significantly and commodity prices fall by 50%, our aftermarket has remained highly resilient, continuing to grow and demonstrating its inelasticity to both CapEx and commodity price cycles. For me, our embedded resilience is 1 of the biggest differentiators of our equity story. So buying a share in Weir, you'll benefit from the long-term structural growth trends in our market and the underpin of our aftermarket focused model, which through the cycle has proven to be amongst the most resilient in the sector. Moving on to the third element of our growth framework, our technology-focused growth initiatives. And Sean and Andrew is going to talk in more detail about the specifics they're pursuing in each of the divisions. However, at an overall level, our ambition is to grow by developing and driving the adoption of new sustainable solutions for mining that will accelerate the growth of our installed base and add further to the core aftermarket algorithm I just described. We're pursuing this through increased R&D investments, targeting 2% of revenue and are prioritizing spend based on voice of customer feedback and projects which are meeting our internal return thresholds. These include protecting our core business through investments in metallurgy and core engineering capabilities. And as I mentioned earlier, developing new products and solutions, which will address our customers' biggest sustainability challenges. In parallel, we're also adding new capabilities in areas such as digital, data management and artificial intelligence. In recent years, our strategic alliances and acquisitions have further accelerated our organic strategy, and we're continuing to build our pipeline of new opportunities. So focusing in on acquisitions, our approach will continue to be disciplined, pursuing bolt-on opportunities which accelerate our organic strategy and which are aligned to our business model and meet our financial criteria. Specifically, there must be a clear pathway for acquisitions to be margin and working accretive to us, and they must align to our priority of growing total shareholder returns. Key areas of focus will remain within the bookends of where we currently play and likely to be in 1 of 3 areas. Firstly, digital solutions. Similar to what we did with Motion metrics and more recently, Sentian AI, which Andrew will build on in his part of the presentation. Secondly, hardware and product infill opportunities where we'll use acquisitions to further add to our capabilities. And thirdly, geographical expansion similar to last year's acquisition of Carriere, which accelerated ESCO's direct in mining strategy. With a strong balance sheet, acquisitions will have the potential to add further to the underlying organic growth we've just discussed, and we have a dedicated team focused on building the pipeline. I'll end this section on growth by just boiling down the themes from last few slides in a few words. We are in really attractive markets. We have a very powerful growth engine, and we are investing to accelerate our growth. So next on to Performance Excellence, where we are doubling our cost saving target to GBP 60 million in absolute savings by 2026, with a cost of delivery of around 1.5x. You may recall that Performance Excellence has 3 main elements to it: capacity optimization, which is focused on optimizing our service center and manufacturing footprint while maintaining proximity to our customers; lean processes, to driving lean philosophy and eliminating waste in our end-to-end value streams; and Weir business services, the transition of the transactional elements of our enabling functions to a global business services model. Since the program was launched last year, we've built great momentum. The business is fully engaged and forging ahead. We've actually seen a snowball effect with the scope of projects expanding and the number of new projects being identified. And this is what's enabled us to upgrade our total target of GBP 60 million, with a new target savings of GBP 20 million for each of the 3 elements of the program. This includes GBP 6 million of absolute savings this year, with key achievements to date, including the consolidation of our North American manufacturing footprint in Minerals, where we have now exited our facility in Madison, Wisconsin and moved operations to our newly-opened Salt Lake City facility, and also the reconfiguration of our Australian service center network. So we're already delivering. Underpinning the new targets are very specific initiatives, each of which is supported by a strong opportunity pipeline of projects. And having made further investments in our team, we have the capabilities to execute and are already in full swing. The opportunity pipeline spans across all 3 elements of Performance Excellence. And as you can see on the slide, it touches both divisions with the graph illustrating the broad contribution from key capacity optimization and lean process opportunities across both Minerals and ESCO. Sean and Andrew are going to spotlight these later in the presentation, but I'm just going to touch on a bit more detail on Weir Business Services or WBS, where the benefits will fall across both divisions. So the objective of WBS is to move the transactional elements of our enabling functions to a global business services model. It's a well-trodden path walked by many organizations before us, and the benefits are clear. It will reduce the duplication of effort across the business, ensuring we have one way of doing things and will deliver an efficient and cost-effective service to the business, leveraging the investments we've made in global systems. It also bring an improved user experience for both our colleagues and customers and stronger career paths for employees and business partnering roles. On the execution side, we've made great progress. The detailed design phase of the project is complete, the overall shape of the transformation has been announced internally, and the first regional transition is due to commence in Q1 next year. The service delivery model will be a mixture of in-house and outsourced services. And by using third-party service providers to enable us to accelerate implementation will benefit from their low-cost service hubs, which alone, we expect to deliver a GBP 15 million labor arbitrage benefit, and that's before we get into the optimization phase. So WBS is on track and 75% of the total cost saving opportunity is already underpinned. So in addition to expanding our margins, performance excellence will also further strengthen our cash generation. Incremental profitability will flow to cash. And by delivering the program, our business will be lean and efficient and our asset base rightsized and well invested, so we'll realize further benefits. From 2024 onwards, we expect CapEx to drop to around 1x depreciation and over time, for our working capital to revenue ratio to move towards 20%. So pulling this together, we are reiterating our commitment to deliver 90% to 100% free operating cash conversion from 2024 onwards. And with us on track to deliver this year's cash conversion of target of 80% to 90%. We've built a strong and consistent record cash generation as a focused mining technology company. And with high levels of profitability and cash generation, our already strong balance sheet will get even stronger. And with this comes a virtuous circle where we have optionality and flexibility on how we allocate our capital, enabling us to prioritize the actions which will grow total shareholder returns. We will continue to invest both organically and through acquisitions to fuel further growth but we'll have the optionality to dial up our investment when opportunities present themselves. Simultaneously, we'll continue to distribute in line with our dividend policy, paying out 1/3 of through-cycle EPS and having the optionality to supplement this with special returns if we get to the lower end of our balance sheet leverage range. So in summary, our balance sheet is strong as we generate cash, it's going to get even stronger. We'll be highly disciplined in how we use that cash to take the actions, which will have the biggest impact on growing total shareholder returns. So just pulling together the themes from this first section of the presentation, I believe the future for Weir is really bright. We are on a journey to sustainability higher margins. We've already made great progress as we deliver against our 17% operating margin target this year. Looking forward, our new target is to deliver an operating margin of 20% in 2026, which will be achieved in two ways: firstly, operating leverage from growth as we deliver against our strategy to enable sustainable mining and continue to realize the benefits of our compounding business model; and secondly, our performance excellence self-help transformation program, where we've upgraded our target to GBP 60 million of absolute savings in 2026. Simultaneously, we'll continue to invest and allocate our capital to prioritize growth in total shareholder returns. So standing back, I'm really delighted with how we set up the growth assumptions underpinning our margin expansion from operating leverage are conservative and the savings from Performance Excellence are underpinned by specific projects, all of which are within our control. So as we enter the next stage of Weir's growth and journey to sustainably higher margins, we have a clear pathway to realize our full potential as a focused mining technology leader. With that, let me now pass you over to Sean to take you through the ESCO section.

Thank you, Jon, and good afternoon, everyone. I'm delighted to be here, my first Weir Capital's event, talking to you about our ESCO division. When I joined ESCO 12 months ago, what attracted me was the strength of ESCO's brand, its global leadership positions and the value it brings to customers through differentiated technology and service, I have not been disappointed. We have a fantastic customer proposition and a fantastic team. As you'll see today, there are many exciting opportunities ahead as we deliver our market growth, coupled with margin expansion from performance excellence. Before I get started, I want to touch on progress since the acquisition by Weir in 2018. In that time period, ESCO's GET market share has grown 7%, which has underpinned revenue growth of over 40%. Simultaneously, margins have expanded by around 600 basis points. While on safety, which is our #1 priority, we reduced our total incident rate by over 60%. Let me now give you a brief overview of the ESCO division. ESCO serves customers in both the mining and infrastructure markets. Mining is our largest market, representing around 70% of our revenue, and it's this segment on which I will be focusing today. Within mining, our focus is on optimizing productivity and sustainability in the extraction phase of the mine. This is the point of attack for our customers. While we have a portfolio of leading solutions, including our ground engaging tools, where we are a global market leader with around 45% share in the large mining machines. We also have our differentiated mining buckets and our motion metrics digital technology. Together, the value of these leading technologies are complemented by close customer proximity through our global service network. We work in partnership with our customers to provide customized technology solutions, which are optimized to suit the rock and dig conditions at their specific mine. And it's this approach which underpins the production partner business model, which was introduced last year. Across the mine, our solutions are differentiated by the reliability, performance and safety. Underpinning this is our deep rooted mining expertise, continual focus on innovation and leading engineering, which combine to make us the trusted partner of choice for our customers. I'll now turn to ESCO's growth and performance excellence opportunities that will allow us to outgrow our markets while expanding margins. As I talk through these, I'll use the same framework as Jon, starting with an overview of our compounding business model and how it drives growth, followed by some comments on our technology-focused growth initiatives. I'll then conclude with some detail on how we're optimizing our operations through performance excellence, including our foundry optimization program and the expansion of our low-cost foundry capacity in Suzhou, China, and how combined the support future margin expansion. So starting with our compounding growth business model. Our ground engaging tools systems comprise of a LIP, which is original equipment and then teeth, trials and adapters, which are expendables, and hence, are referred to as aftermarket. Our best-in-class system has proprietary connecting technology. So once a LIP is installed, we have a 100% capture rate on the expendables. This makes our large installed base of lips, a significant asset. And this model is reflected in our revenue mix, which has an aftermarket bias of more than 90%. The life of a LIP can range from 5 to 10 years, but expendables wear out much quicker. Wearing down as they engage the mine with ore body or in the mine. Wear life of expendables varies by application, typically lasting a few weeks. One of the most extreme applications this shortens for a few days. Demand is driven by the quantity of ore and overburden moved, underpinned by mining production trends and the impact of declining rates. ESCO solutions are differentiated by their extended wear life. So expendables need replacing less frequently than competitors giving them embedded sustainability benefits. Our value proposition is, therefore, lower total cost of ownership or TCO, as our solutions reduce downtime and improve productivity for our customers. Through our global sales and service network, we provide 24/7 support to our customers, ensuring they have mission-critical components to keep operations running. And together, with our best-in-class TCO, this creates a strong barrier to entry. A LIP system will generate 1 to 4x its value in expendables each year. That's 1 to 4x its value and expendables every year, a truly great business. And our leading technology means we continue to convert customers to ESCO LIPs and grow our installed base. driving compounding growth through incremental aftermarket demand, just as Jon described. What's more? Each mining bucket we sell has an ESCO LIP installed. So our increasing traction in this area further supports aftermarket growth. In summary, ESCO's technology offers the lowest total cost of ownership for our customers while improving mining efficiency and enabling sustainable mining. I'll now take you through some of ESCO's growth opportunities. The map shows our relative market share by region for 3 of our main product categories. For example, in GET, shown by the circle, we are the global market leader. But our share varies by region. As you can see from the darker shading, our share is strongest in North America, but lighter on other regions, so we have global opportunities for growth. In mining buckets, where we're growing quickly, we still have lots of opportunities across all regions. And finally, the market for digital solutions is emerging quickly, which provides tremendous opportunity for our motion metrics technology. I'll now talk about how we're driving growth in each of these product categories and how our leadership in GET is enabling us to provide optimized solutions, comprising all our products to improve mine productivity and efficiency for our customers. Focusing first on GET, where the global market is large, the global market for large mining machines is approximately GBP 800 million, and our share is about 45%. We are the premium product in this segment, and our solutions are differentiated by: one, improve wear life; two, improve dig performance, meaning teeth engaged with ore in the optimum way, driving machine productivity; and three, our proprietary connecting technology, ensuring quicker and safer teeth change-outs. Together, these factors minimize downtime for our customers, improve productivity and sustainability and deliver the lowest TCO. Our focus on innovation means we continue to develop this proposition and grow share. In 2012, we launched our current GET system called Nemesis. And as competitors have raced to try and match our value proposition, we've invested, staying several steps ahead. In 2024, we will launch our next-generation of GET system, ensuring TCO leadership for years to come. We have been trialing this new system with several customers for over a year. and the results are exceeding our expectations. The improved wear life expands on ESCO's leading TCO for our customers and will drive further gains in share. Turning next to our capital strategy, focus on mining buckets, where our share today is small. Annually, the global market is worth about GBP 400 million, and participants include machine OEMs and a large number of small independent players. Historically, solutions from independents have been price-focused and undifferentiated. However, since focusing on this category in 2019, ESCO has changed the game, and we're growing quickly. With revenues up almost fourfold in that time period. Our mining expertise and dedicated resources enable us to provide a premium value proposition, and we optimize the design for each bucket to suit condition at the customer's mind. As a result, our solutions are the most reliable and require the lease maintenance. And when coupled with an ESCO GET system, have a faster fill rate got moved. Finally, on this page, Motion Metrics, where the market is fast emerging and we estimate a potential of over GBP 500 million. As a reminder, at the time of acquisition, the primary attraction of the Motion Metrics technology was its tooth loss detection capability. Tooth loss can be a significant event for your mine with the potential to block the crusher, creating a safety risk and causing significant downtime. With its vision-based sensing underpinned by artificial intelligence, Motion Metrics is not only the best at tooth loss detection, but as several other significant advantages over competing technologies. First, it is GET agnostic. Our system does not require our customers to only use ESCO GET. Second, with our vision-based technology, there are many additional customer value offerings beyond tooth loss, including tooth wear, boulder detection, LIP shroud loss and fragmentation analysis. And as we develop new offerings over time, it allows us to provide additional value to our customers on their existing motion metrics platforms, creating further upsell opportunities. ESCO's global sales coverage has driven motion metrics adoption across our existing customer base, delivering on the revenue synergies we identified at acquisition. In addition, Motion Metrics opens doors to non-ESCO customers, driving benefits in our GET and mining bucket segments. On the next slide, I will provide more color on how ESCO's industry-leading technology, coupled with our global service network creates such a powerful combination of value for our customers. Since ESCO's acquisition by Weir in 2018, in addition to the technology investments just described, we have pursued our direct in mining strategy to expand our sales and service network and further embed ourselves in our customers' operations. By being on the ground close to our customer, we're using our leadership in GET and deep-rooted mining expertise to cross-sell our portfolio of solutions and expand our presence at the mine, all of which provides further productivity and sustainability benefit to our customers. We'll now bring this to life with a case study. For many years, we've been supplying a large copper mine in North America. The ESCO service team are with customers day in and day out and have an incredible entrepreneurial spirit to understand their customers' challenges and come up with the best solutions. Let me give you some more color. As the customers expanded their operations, instead of adding more expensive haul trucks, they made the decision to do more crushing in the pit and transport the ore on conveyor belts. This process requires unique wear parts with high wear characteristics, and we are supporting them with that solution. Given our proximity and deep understanding, we designed a customized solution for them manufactured in our nearby facility. In addition, the customer was seeking to improve dig efficiency. So rather than sourcing new mining buckets from their usual OEM supplier, they turn to ESCO and this led to our first bucket sales with this customer and increased our share of GET. Furthermore, we're also expanding and upgrading their motion metrics technology. It is this type of customer intimacy that has allowed us to grow with the customer across all our products and create strong barriers to entry. As you can see from the graphic on the screen, over the last 3 years, we have doubled our share of wallet and significantly expanded our presence on each machine at the mine, moving from just the green GET to also supplying the red bucket and the Blue Motion metrics technology. This is one of many opportunities globally. I'd now like to share a video from my colleague, Melissa Davidson, to tell you about how she's driving growth in the Australasia region. Melissa will explain how ESCO collaborates and grows with our customers, and the video will also give you a better appreciation of ESCO's industry-leading products in action and the rugged environment in which they operate. [Presentation]

Thank you, Melissa. It's great to hear how our differentiated technology and customer proximity are driving growth for ESCO around the world. As I mentioned at the beginning of the video, how we are just solving our customers' toughest challenges in rugged environments. Personally, I spend a lot of time on mine sites, seeing our technology in action and seeing just how important it is for our equipment to have the best performance and the most reliability. Customer service and great technology is so powerful when you put them together. Now I want to talk about performance excellence. I'll start with an overview of our vertically integrated model. Our global footprint comprises of our sales and service centers, which are essential to our value proposition, keeping close to our customers, and also our manufacturing facilities and foundries. Across the world, we have 5 foundries, and it's here where we manufacture our proprietary technology. Our leading metallurgy and foundry process expertise give our GET their wear life benefits. So our integrated model is a crucial value driver and protects our IP. It also derisks our supply chains. And by managing the network on a global basis, we have flexibility in how orders are fulfilled and allows us to be highly responsive to our customers' needs. This model works well for us by allowing us to protect our IP while better serving our customers. So our foundries are the foundation of the division, and our wear performance excellence opportunities lie. Here are 2 specific initiatives that we are focusing on. The first is the continued optimization of our North American foundries where we are driving to improve performance towards that of our best-in-class foundry, which is in Suzhou, China. This is a data-driven effort on systems that are fully embedded across all our foundries. The second initiative is the expansion of our low-cost foundry capacity, which we'll achieve through the investment made in our foundry in China, Suzhou 2. I'll now share further details of each of these projects, but first, let me give you some context. Operating foundries is a complex task. We monitor performance closely with cost per tonne being the most critical metric. Put simply, this is how much it costs produce each tonne of product so it drives our cost of sales and impacts the profitability of the division. At a high level, the 2 main drivers of cost per tonne are cost of materials, and what we call conversion cost, being the cost to turn raw material into finished products. There are many factors which influence conversion cost, but 2 of the most significant are predictability and quality. We measure predictability through heat attainment. To explain, a heat is a single furnish charge of steel, and heat attainment is whether we are achieving the planned amount of these charges in a specific period. For quality, first pass yield is a good measure, and it indicates inefficiencies in scrap and rework. Having launched our foundry optimization program last year, we are making solid progress. As you can see from the chart, over the last 12 months, we've increased our average heat attainment by 3% and first pass yield by 4%, reducing our conversion cost by millions of pounds in 2023. However, there is still a spread of performance across the network, which is an opportunity to improve. Our target is to lower our average conversion cost per ton by 10%. Over the next 3 years, optimizing our foundry performance in North America and expanding our capacity in China. Let's start North America. When running foundries, having strong repeatable processes is essential. Achieving this requires well-maintained equipment, supplemented with digital tools, providing clear performance data that capable leaders can monitor in real time. And this is our recipe for continuous improvement. For example, we are monitoring real-time data on our critical machines. In the last 12 months, we've taken action to reduce our unplanned maintenance by nearly 10%. So we are already seeing benefits in unlocking improvement in heat attainment and predictability. Improving quality is a full team effort. We are dedicating resources from our metallurgy, engineering and continuous improvement teams to focus on reducing the 2 key indicators of quality, scrap and rework. This is ongoing, but initial process progress is encouraging, with some sites cutting these critical metrics by 50% over the last year. Furthermore, by deploying design for manufacturing principles, we're ensuring that our newest products like the next-generation GET system I mentioned earlier, are launched with minimized scrap and rework issues from the start. Together, the improvements we're making will make ESCO a safer place to work, reduce the waste we create, thereby improving our sustainability and will drive down our conversion cost per tonne. Moving on, I'm also really excited to talk about Suzhou 2. This is a $60 million investment by Weir in a new state-of-the-art foundry in Suzhou, China. It will replace our existing facility in the city. And once operating at peak capacity, will produce nearly 70 tonnes of GET per day. This is about 30% more than the foundry it replaces. So we significantly increased the proportion of the division's total capacity in our lowest cost location. Furthermore, increased use of automation will improve efficiency, further drive down the cost to manufacture. To bring it to life, I'll pass you over to my colleagues. Guangkuo Zhao and Daisy LI to tell you more about it and show you around. [Presentation]

Thank you, Guangkuo Zhao and Daisy and the entire Suzhou team. It's exciting to see this great project progress so well and so quickly. So stepping back, delivering these two performance excellence initiatives is well within our control. giving me confidence that we can achieve our target to reduce our conversion cost per tonne. I'll now wrap up by recapping on the key messages from this section of the presentation. ESCO is a global leader in the mining extraction space. We have a portfolio of differentiated technologies are deeply embedded in our customers' operations and have an aftermarket based business model, which drives compounding growth. We have opportunities to grow across our portfolio. In GET, we will win further share through our differentiated technology and the upcoming launch of our next-generation product, while in both mining buckets and motion metrics, we're growing rapidly, and there's lots of running room. And finally, through performance excellence, we're realizing our full potential, driving lean processes through the foundry operations and expanding our low-cost foundry capacity. Thank you, and I'll now pass you over to Andrew.

Okay. Thank you, Sean, and good afternoon, everyone. In the next section, I'm going to focus on our Minerals division, having been both the Vice President of Finance and Managing Director for the European region of Minerals, I was delighted when Jon asked me last year to move back to ESCO from ESCO to take on a Division President role. Minerals is a great business, and we have an excellent team and the growth and performance excellence opportunities, which lie ahead are really exciting. So let me take you through these in more detail now. Starting with a brief overview of the division. Minerals predominantly operates in the mineral processing plant. This includes Comminution, which is a process of crushing, grinding and screening rocks and also in wet processing where our equipment is used across the whole mill circuit to process and classifying slurry. We also have a strong downstream presence, providing equipment for tailings management. Today, we have a number of global leading brands in our portfolio, differentiated by their performance, reliability and extended wear life. We combine these into optimized integrated technology solutions that drive productivity for our customers day in, day out. Through our extensive global footprint, we provide 24/7 wraparound service support to this offering, which gives us a real competitive advantage enabling us to continually tailor our solutions to the ever-changing conditions of the ore processing plant. Underpinning our technologies, we have world-class engineering capability and a strong culture of innovation which have powered our growth and success in recent years. The renovations have broadened our capability beyond our core slurry pumps into new product lines and new solutions, expanding our addressable market and the value we can deliver for our customers across the processing plant. Turning next to our growth and performance excellence opportunities. I'll use the framework we will now be familiar with, starting with an overview of our compounding business model, touching on some of our growth technology focuses before diving deeper into our performance excellence opportunities. But I'll describe how we are making our operations more efficient and driving margin expansion. As Jon described, our business model drives compounding growth over time. We have a large installed base of equipment, typically operating in the most abrasive parts of the mine. So it regularly wears out, creating an annuity-like demand for aftermarket spare parts. Demand for our spares typically grows in line with run-of-mill production trends, multiplied by the effects of declining grades and market share gains. As I mentioned earlier, our global sales and service network ensures we stay close to our customers and is a significant rate, which is over 90%. The service center network also opens up regular cross-selling opportunities to extend the range of equipment we have on a particular site. And that incrementally expands our installed base and aftermarket opportunity and fuels further profitable and sustainable growth. Let's take a large Warman mill circuit pump, which in a typical application pumps a slurry containing water and rocks. Once installed, it is usually in place for the life of the mine, which can be many decades and can generate between 30% and 100% of its original sales value every year, with parts such as impalers and throat bush being replaced every 3 months. So the business model is fantastic, and this aftermarket characteristics span right across our product portfolio, with our focus being on providing the lowest total cost of ownership for each product and process, leveraging our technology and service presence to embed us in our customers' operations. And we have opportunities to keep growing and to make our installed base even bigger. Let me tell you more about that. The map on this slide shows our relative market shares by region across 3 of our main product categories. And even though we're already the clear global leader in pumps and cyclones, you can see our shares vary by region, providing headroom for growth. For example, in cyclones and classification, which is depicted by the square, you can see from the darker shading our market share is strongest in Australia, but lighter in other regions. While in combination, which is spearheaded by our HPGR product, we have a leading technology in emerging market alongside a broad range of crushers and screens, so there's plenty of room to grow. Across the portfolio, we are pursuing growth through 3 specific strategies: firstly, trials and upgrades to reduce the total cost of ownership of a single piece of equipment. We have a high success rate in head-to-head trials with competitors, so we continue to win market share in individual products; secondly, debottlenecking or efficiency improvement solutions. Here, we partner with customers to provide integrated solutions of wear equipment, optimized to increase throughput, expand capacity and reduced production costs at existing mines; and lastly, our most recent growth strategy, rolling out our redefined mill circuit. This flow sheet can be installed either in full or in modular components thereby making it suitable for both existing and new mines. And it's our progress in the redefined mill circuit I'm going to focus on today. I'll start with a recap of the traditional mill circuit, a system which typically incorporates both a SAG and Ball mill, sometimes called tumbling mills. The simplified configuration shown here on the slide has been used in mining for many decades, long before sustainability was a consideration. However, it is inherently inefficient as many sustainability challenges. The role of the tumbling mills is to grind rocks, turning them into powder, so the minerals can be liberated. This happens when the rocks fall into each other or when they are struck by steel balls and the one is grinding media. How and when this happens is unpredictable, and this causes problems downstream, controlling the particle size is difficult with a large and moving distribution at any one point in time. This means a significant proportion of the ore has to be reprocessed to achieve a desired particle size. This is known as recirculating load and can account for up to 1/3 of mill capacity at any one time. In addition, water is required in the mill, so a lot is lost to leakage and evaporation throughout the process, and the majority ends up in waste and tailings ponds. So the traditional circuit consume huge amounts of energy, creates lots of waste and uses a lot of precious water. And it's these challenges that we're tackling with our redefined mill circuit by replacing the SAG and Ball mills with a combination of high pressure grinding rolels, vertically stirred mills, tumbling mills are completely removed from the circuit. Grinding is a lot less energy intensive and our output is more predictable. The result is a tightly controlled particle size, dramatically reducing recirculating load. In addition, water has added downstream of the HPGR, materially reducing the water demands of the circuit. Since introducing the redefined mill circuit to you last year, we've been working hard to precisely quantify the energy and emissions benefits of the system, and these are known as avoided emissions or scope 4. And I'm delighted that the benefits have now been independently assured by the sustainability experts at SLR Consulting. Our work shows that in a typical copper mine, energy consumption is reduced by over 40% and emissions are more than half per tonne of ore. In addition, the operating cost of the system is around 20% lower than that of the traditional circuit. So combined, the operational, financial and sustainability benefits for our customers are truly compelling. This avoided emission study, which is the first of its kind for a mining case use case is receiving global interest with both government bodies and the finance sector waking up to the opportunity to materially reduce the carbon footprint of mining. We are at the forefront of this and we were invited to take part in a panel discussion on avoiding emissions at COP28 last Sunday, moderated by the World Business Council for Sustainable Development. We're really excited about the redefined mill circuit and the impact it can have on making mining more sustainable. Furthermore, as we look ahead, the enablers of growth are in place. We have great technology, as I'll now go on to explain, our sales pipeline is growing, and our technology reference sites are driving adoption. On this slide, you can see the data on our sales pipeline for our HPGR, which is the lead indicator of demand for our redefined mill circuit. And while disclosing the absolute number is commercially sensitive, size of our pipeline has increased eightfold since 2017. Pleasingly, we're seeing demand across a mixture of commodities and from customers pursuing both brownfield and greenfield projects and momentum is building. In addition to the compelling environmental and cost benefits, One of the key factors driving customer interest is our technology reference sites. The mining industry is conservative. So validation of the technology and operation at a live mine is really powerful. Our best example of this is Iron Bridge, I'm going to hand over to my colleague, Stuart Hayton, to tell you more about it. [Presentation]

Thanks, Stuart. It's truly great to see the Iron Bridge flow sheets in action. It's a real milestone for us and an important proof point for our technology, showcasing the great cost and sustainability benefits of our redefined mills. Moving on, and as John mentioned earlier, we will use bolt-on acquisitions to accelerate our organic strategy, focusing on geographic expansion, product infill and digital solutions. Geographic expansion, we already have a strong global service and manufacturing network. So the pipeline is relatively narrow. However, there are one or 2 pockets around the world, we're bringing in specialist manufacturing or service capability would be additive of where we could product leadership in a specific region. From a product infill perspective, more generally, I'd say we've got 3 key aspects. Firstly, premium positioned after market buys products especially in comminution which fell representing a small part of our portfolio today is a big opportunity. Tailings, an area where we're already very active, but it's an increasing focus for our customers, so we're keen to keep strengthening. And then there's transformative new technologies that enable us to challenge and redefine existing flow sheets to enhance productivity and sustainability for customers with HPGR being a good example of this. Turning lastly to Digital Solutions. Here, we're looking at opportunities together with our colleagues in ESCO and areas of interest include ore characterization and capabilities which add to our predictive maintenance solutions. We're also interested in adding process optimization capabilities. And as you will have seen, we announced the acquisition of Sentian.AI a couple of weeks ago. In the last few months, we've been working closely with the Sentian team on a proof of concept to optimize the performance of Weir equipment in the processing plant. So it's a natural next step to bring the technology in-house. It expands our digital capability and accelerates our technology strategy, complementing and bridging from the already strong platform we have with Synertrex. As a reminder, Synertrex is our proprietary intelligent digital twin technology, which monitors equipment health and performance, enabling optimization, supplemented by a remote monitoring and analytics capability. We've made great progress driving adoption of Synertrex over the past few years, supported by recent product launches, including our latest generation in Intelli-pumps and Intelli-cyclones. So it's a great time to be acquiring the Sentian platform. The technologies are synergistic. Sentian AI enables process optimization software with inputs from Synertrex and from across the broader processing circuit to make recommendations and our throughput can be increased and emissions and energy consumption reduced. It can also enable automation, so opening the door to exploring new business models such as performance-based payments and software as a service, which is really exciting and shows the long-term growth we see in digital technologies. I'll now move on to the division's performance excellence opportunities, and I'll start with a reminder of how minerals currently operates. We have a global service and manufacturing footprint, which you can see on the slide. As you've already heard, our boots on the ground and service footprint is a real differentiator and a significant value driver. And so too is our integrated manufacturing model, ensuring we protect the IP, which underpins our technology differentiation, while also derisking our supply chain, always have the mission-critical parts they need in order to avoid downtime. Historically, our manufacturing has been largely managed on envision for vision basis using regional ERP systems and regional costs and operating policies. While this model serves us well and being able to support rapid and reliable delivery to customers, the manufacturing everything everywhere model has some inherent inefficiencies. So we have opportunities to optimize and embed a more flexible and efficient manufacturing strategy. To put ourselves in a position to unlock this opportunity, we'll be making substantial investments in the past few years to adopt common foundational systems across the division. Historically, minerals had over 20 ERP systems in use across the globe with multiple variants of support systems across engineering, finance, HR, operations, services and supply chain. This meant no consistency in process or even part numbers. Getting a single instance of best-in-class tools has been the focus for the past few years to enable us to operate globally. By investing in SAP, we now have a global ERP system, which was supplemented with investments in operational and optimization tools such as 42Q [indiscernible]. Together, these allow us to deploy standard global operating and costing policies, providing comparability across the whole division and enabling data-driven decisions. Put simply, we're now able to look at the end-to-end performance of minerals on a global rather than just a regional basis. So with this deeper level of insight, the optimization opportunities are significant. And with the technology and systems rollout largely complete, we're now moving into the benefits phase, and we're ready to realize a return on that investment. This slide shows our performance excellence priorities, across capacity optimization and lean processes in 4 categories. The first one is optimizing our roof line and manufacturing strategy. We've already completed the first phase of this, including the opening of our new distribution center in Salt Lake City, which will deliver around GBP 4 million savings in 2024. we're now expanding the scope looking globally at what products we make wire and using best cost country manufacturing. Second is operational planning, logistics, benefitting from economies of scale in our purchasing and optimizing our logistics channels and how we fulfill customer orders. Thirdly, we have product life cycle management, having a single global view on our product range and ensuring standardization across regions will eliminate inefficiencies in engineering, manufacturing and logistics, we are enabling further leverage of suppliers. And fourth is operational efficiencies. We were deploying lean methodologies right across our operations to eliminate waste. I'll now cover each in more detail starting with how we'll optimize our footprint with a focus on our manufacturing operations. As I mentioned everywhere -- everything everywhere, manufacturing model enables rapid and reliable delivery, but is also inefficient small batch volumes and limited use of standard production processes means cost of product can vary across the world. While design and manufacturing processes have also diverged as we've made one-off bespoke solutions for customers. In addition, making everything in-house means critical capacity can be absorbed, making small nondifferentiated components. So looking to the future, for our mission-critical equipment and spares will continue to use our manufactured in-region model. These products are IP-rich and our customers value local manufacturing with simple logistics and short predictable lead times. We saw the value of this once again during the recent post-COVID global supply chain challenges. However, for our longer lead time and modular equipment and also some of our smaller and less differentiated components, we'll move towards a global or regional manufacturing supply model. This allows us to use best resourcing, and we are going to make sense to do so, we'll use third-party suppliers. This dual approach gives us more flexibility in our manufacturing strategy and enables us to exit certain facilities and lower our cost base. I'm going to bring this to life as an example of where are the projects already underway. In Australasia, currently, we manufacture elastomers in 2 facilities, one in Australia that focuses on large parts and one in Malaysia focused on small and medium parts. These components are mainly molded, used -- components using our pumps and cyclones. The facility in Malaysia is our best-in-class lean facility, and also manufactures our line of tech from our product range. In comparison, the cost to manufacture in Australian facility is higher. With modest incremental investment, the facility in Malaysia has sufficient capacity to meet the needs of the whole region and also become more efficient. So in our Performance Excellence opportunity, we're consolidating elastomer manufacturing from both facilities into Malaysia and creating a center of excellence for rubber manufacturing in Asia Pacific. The move will significantly reduce our variable and fixed cost base in the region while also freeing up space for us to optimize our Heavy Bay foundry in Australia. In total, from this capacity optimization project alone, we expect to deliver an annual benefit of over GBP 3 million with initial savings realized next year. Turning next to our 3 lean process priorities. First, operational planning, procurement and logistics. Today, this is largely managed at a country level. A customer places an order, the in-country team either ships from stock or manufacturers associated procurement and logistics are managed locally. Our investment in systems and the changes in our manufacturing model means we can now operate to a divisional strategy, managing fulfillment on a global basis, shipping from stock if we can or manufacturing in the Optimum facility. This eliminates inefficiencies across the manufacturing value chain, simplifies logistics and realizes economies of scale and purchasing. And with only 14% of our annual direct spend currently managed under global contracts, the opportunity is sizable. Turning next to product life cycle management. Historically, product management has been in the scope of the regions. So part numbers vary across the world that we've had proliferation of products with tweaks made to standard products to suit local trends. The result is a long tail of product variations. For example, in the last 3 years, we've sold around 100,000 different aftermarket SKUs. And of those, just 20% accounted for 90% of our revenue. So by steering product selection in the sales process to a much smaller predefined set of global standards, we will materially reduce the complexity of our operations. To deliver this, we're rolling out global part numbers and product configurator tools, enabling customers to specify products to their needs while simultaneously controlling the number of possible variations. Our third opportunity is operational efficiencies where we'll achieve benefits by expanding lean and reinvigorating our lean culture. Historically, our approach to lean has been fragmented concentrating on our manufacturing operations only and following an off-the-shelf tick box approach. While we've made good progress by investing in divisional talent and capabilities, we've designed a new lean operating system called Weir Integrated Network Solutions or WINS across all value streams in our global operations. WINS is focused on outcomes using really practical approaches to tackle big problems. It combines training and development for our people in lean culture with the introduction of standard processes and frameworks that can be applied locally to identify and eliminate waste across the value chain. I'll now pass you over to my colleague, Nicholas Dalhoff, who works in our Salt Lake City facility to explain how he's using WINS in his work. [Presentation]

Thanks, Nick. We're at the start of our WINS journey, and I just completed some of the training myself. I'm really excited by the opportunity for improvement that this will unlock. I'll wrap up this part of my presentation with a summary of key messages. Minerals is a world-class business. We have differentiated technology and leadership positions across the fuel mining process circuit and our aftermarket bias business model delivers compounding growth. We have many opportunities to grow across our 3 product categories, and we are gaining traction with solutions, including our game-changing redefined mill circuit, which delivers significant cost savings and energy efficiency benefits for our customers. And lastly, for Performance Excellence, we're realizing our investments and systems to optimize our footprint and drive lean throughout our end-to-end value chains, while protecting our IP and staying close to customers. Thank you. I'll now pass you back to John for his closing remarks.

Right. Thank you very much, Andrew. And also to Shaun and all of my other Weir colleagues who've been part of the presentation, of course, all of the backroom staff who've put this excellent session together. I'll just conclude now with a summary of the key messages from today's presentation. We're continuing on our journey to sustainably higher margins and now have a 2026 operating margin target for Weir of 20% and as you've heard today, we'll achieve this by capitalizing on growth opportunities from smart, efficient and sustainable mining and by delivering on our Performance Excellence transformation program with an updated 2026 cost-saving target of GBP 60 million. Our overall positioning and the compelling value creation opportunity, which lies ahead gives me great confidence in further expanding our margins and then setting this new target. We're a global mining technology leader and the combination of our world-class engineering capability and our highly resilient aftermarket business model puts us right at the heart of our customers' operations. This differentiates Weir from its competitors and means that the barriers to entry are high. We play in attractive markets driven by multi-decade trends. The world needs more critical metals to get to net zero and our customers need to adopt new technologies to extract and process those metals in more efficient and sustainable ways. And with performance excellence, we're taking action optimizing and transforming to create a lean and efficient business, reducing our cost base and driving margin expansion. So today, I'm pleased to be further strengthening our commitments to deliver excellent outcomes for all of our stakeholders, compounding growth, margin expansion, strong cash conversion alongside best-in-class resilience and a compelling sustainability road map, which together will further strengthen our balance sheet, giving us optionality in how we allocate our capital, driving growth in total shareholder returns. So standing back, we have an excellent team and a world-class business. Our margin expansion ambitions are well underpinned by performance excellence and conservative growth assumptions and we have a demonstrable track record of resilience, all of which leaves us positioned to be a standout performer in our sector in the years ahead, moving ahead to now realize our full potential as a focused mining technology leader and enabling smart, efficient and sustainable mining for our customers. So thank you very much for listening, and we'll now move on to take your questions. If my colleagues will join me up here on the stage. Thank you.

We'll start from the front shall we? Andrew would you like to go first?

It's Andrew Douglas from Jefferies. I've got 2 questions on ESCO and one for the new CFO, please. On the working capital to sales movement, I think we're around about 23%-24%, and I think you're targeting 20%. I'm assuming that all the focus on lean, et cetera, will be driving inventory out of the channel, and that's the main differentiate between 24% and 20%? Or is there more to it? So if you can just walk us through that, that would be helpful. And then on ESCO, you say that GBP 100 of lip OE gives you GBP 100 to GBP 400 of aftermarket. It's quite a big variance. So can you just explain why that why that is? And then buckets, you've got a quite considerably lower market share compared to GET. Again I'm [indiscernible] so, if you can explain that, that's helpful. I'm assuming that the big boys in that market have got material scale advantages. And if that's right, why should you gain market share? .

Okay. Well, as the former CFO, let me take the working capital question first and then Sean can pick up on the ESCO question. So yes, look, I think we're actually in really good shape at the moment with, as you say, working capital as a percentage of revenue just below 25%, which I do believe is already sector leading, but we have more room for improvement. And I think what's interesting is we've talked about the operational improvements today in the context of savings and efficiency and profitability, but there's going to be a big working capital benefit as well. All the things guys talked about in terms of those operational improvements -- for example, the product life cycle management and minerals, that's going to take inventory out as well. So there's going to be a working capital benefit that goes alongside the profitability improvement. So I think, yes, as we said on the slide, I think 20% working capital percentage of sales is possible for our business, and we should get closer to that as we go through the next 2 or 3 years. And inventory reduction is going to be the big driver of that. Sean, on the ESCO question?

Yes. So on the first question, kind of the range of payback or if you will, the multiple off of one lip per year basis. The short answer is it varies a lot because of the conditions that each machine is in and what the conditions that the GET therefore faces in those conditions. So if you go to not just across different types of ore, whether it be iron or copper, but also even across different iron mines, the way the customers use it, the location, the way to do their drill and blast, there's a lot of variables that go into that. So you can imagine, take it to extreme easier conditions, soft rock, maybe surface coal, that's going to have a more to the GBP 100 that you're pointing to. When you go to more harsh conditions, copper, iron, you get more into the GBP 400 kind of condition. So the range has a lot to do with the mine itself and the conditions that the GET faces. It averages honestly, closer to the GBP 400 side than it does to the GBP 100 because most of our applications are in hard rock. [indiscernible] he had another question before you.

The market share on the buckets...

On the buckets, yes. So as I mentioned in the presentation, ESCO really launched into the bucket space in 2019. And again, we had 4x growth in that period of time. To your point, yes, you're right. A lot of the first fits go to the OEMs, the commodities, the Caterpillars, et. cetera, [indiscernible] but we do get some of the first fits where customers will ask for our design specifically. When we don't get the bucket, sometimes just to add to it, we get the lip instead of the bucket on the first fit. And then a lot of times, as the machines in operation for a period of time, they'll go to an ESCO bucket and an ESCO lip all at the same time. So in this market, what you have is the OEM is doing a lot of first fit, but then you have a lot of local players in the different regions that supply locally. As I mentioned, they're local. It was undifferentiated, kind of we're bringing that differentiation that we bring to GET. We're moving it up into the bucket, and that's allowing us to grow someone on the first fit, but also service the machines over their lifespan.

Just to add to that, it's also the customer proximity point about having people working in the pit there with the customer. We're understanding what are they doing with their plans for machines or replacement machines, what are they doing with their bucket strategy, so they'll have people who are thinking about this. And we're talking to them very, very regularly to understand what their strategy is, and then that drives our sales approach as to whether it's bucket GET whatever we're doing. And so again, that's where our differentiated business model of boots on the ground, more boots on the ground than anybody else comes to before and really helps us grow and protect the business. So [indiscernible] So we can work back in the room, sort of handed around.

Can you update us on both the phasing of both the costs and the benefit of this expanded performance enhancement plan. Is that and I guess, does that feed into a relatively linear progress on margins from the 17% this year to the '20 and '26? Or is that a bit more back-end loaded?

Yes. So there was a chart which kind of shows the breakdown between the various projects and how that will build up over time. So where we are at, at the moment, obviously, we're doing a lot of work over the last 6 months in terms of building this strategy and what are the things that we're going to do and putting the plans in place and we're now moving into the implementation phase of all the incremental projects, which we've been developing on. So that means the benefits will build up over time. So there'll be a bit of back-end loading. So very broadly speaking, it's going to be GBP 6 million of benefits this year, probably mid-teens next year, getting into [ 30 ] or so the year after and then full [ 60 ] in 2026, so that's the kind of it and it may move around a little bit because, obviously, the nature of these projects is that some will be able to move more quickly on others might take a bit more time. But we've got a long list of things that sit behind all of that. So very, very comfortable that we'll deliver that over time. And obviously, the costs will be more front-end loaded probably. So this year and the next 2 years and falling away in 2026 as we get into the full benefit realization stage.

And the margin benefit, is that relatively well split between the 2 divisions? Or is it more weighted one way or other?

Yes. I mean, it's relatively well balanced between the 2 divisions. So obviously, mineral starts from a higher -- slightly higher place, and we'll end up in a slightly higher place, but they'll move up broadly in step over the 3 years.

So I have 3 for you, Jon. Obviously, your track record is solid, but I'm interested in the lean bucket, quite a big step-up from GBP 5 million to GBP 15 million. Have you done anything to incentives to make this realization more credible in terms of management incentives. That's the first one. The second one is on the cash flow and maybe ask this in a slightly different way than [indiscernible]. You've obviously lifted the margin target. You've kept your cash conversion target unchanged. You're going to 20% working cap. Could you talk about what you found any sort of opportunities to realize that quicker as you've sort of been going through, particularly on the lean side? Or are we talking about 2026 as well? And then my third and final one is on the ore growth. You talk John, about you have historically outgrown by around 2x. Now you talk also about green steel and so forth. As the sort of addressable market change as well for you, can ore growth for Weir Group grow faster than history? That's my 3 questions.

Okay. Well, let me talk about the first one in terms of incentives and then maybe Andrew just pick up a bit more detail on the lean because it's mostly minerals, but obviously, Sean, feel free. And then I'll come back on the growth algorithm. So I think when you talk about incentives, we've got the business and our people really inspired about what this company is and where it's going at the moment. So I think it's twofold. We've got a really, really passionate and aligned group of employees who really bought in to where this company is going and the potential of it. And we've got superb alignment across the business. And you know our culture has always been sort of very strong in that regard. So what we're trying to do now in terms of moving from being a good company to a great company, is really got the organization fired up and our people really excited by it. So I think that's really important to understand. We talk less about culture than maybe we should. But we've got a great team and they're really, really fired up about where we're going. But then, of course, we will back that up by making sure that we've got the appropriate reward programs in place and that includes the sort of existing annual bonus plan because as we drive the growth in margin and profitability and cash generation targets 3 years will be set based on what you've just seen. But of course, there will be specific supplementary kind of retention programs and other things that we need to put in place just to make sure that we're covering off, which is more of kind of risk covering off, if you like. So I mean that's how we're thinking about it. Andrew, maybe just touch a bit on the lean initiatives.

Yes. I think lean absolutely is going to generate cash, obviously as well as margin. Indeed, a lot of the benefits drive to that. The core of lean as you obviously know is again velocity through the plant. So again, are shorter the lead times we can create. And so it will be a great way to drive down inventory over time, and we see that. I think I'd also kind of highlight filling into systems as well tie into that because again, as we get unified SIOP process as we see them optimizing it. And again, fundamentally, I would expect that to help us increase our inventory turns to a place that we'd like to try and get to, as Jon said, really the working capital target, underpinned really by inventory. We're not assuming stretching creditors further and better debtor days. It's really driven by the benefits coming from lean and that systems investment. We already see some of that, for example, in our EMEA region, where we've pulled that together and actually proactively looking, we're generating, I think we're over GBP 100,000 a month of stock reduction, sort of first regions we're seeing, right. Let's cross over what have you got? What are your ordering? How can you fulfill? So that's already started to see that incremental benefit. And even as we broaden that product life cycle management across all regions, across all products combined just the lean fundamental continuous improvements, kanban is driving that down. All of that will hopefully support not just margins, but the reduction in the level of inventory that we have fundamentally need to support in that business.

Okay. So just on the ore growth algorithm. I think where we are today, and we've shown you the 12-year sort of progression, some CAGR many times now, and that's because we believe the history is the best predictor of the future. And that algorithm, as we've talked about a lot today, is going to continue. There are some probably things in the mix, which are strengthening, which obviously, I highlighted around iron ore and copper and the battery metals and so on. You have to remember, we still have some coal in the mix, and that's going to continue to decline. Our oil sands exposure is probably going to stay flat. And then the overarching piece would be that at the moment, we're not seeing a big CapEx cycle coming. So I think that's the thing which would turbocharge it, but we just don't see that in the next few years. If that comes fantastic and that may give us a boost above the kind of 3 cycle targets we've got, but we're just not -- it's not coming through yet. Andy?

It's Andrew Wilson from JPMorgan. I've got 2. I'll tell one at a time, I guess. Just on the 2%, I think you said 2% of sales for R&D. And kind of you obviously talked about a lot of these opportunities in terms of sustainable mining and kind of technology development. Is that 2%? Is that the right number in the sense of are you expecting that to be 2% in 2026? And I guess if you're spending I guess, a little bit more in absolute terms, but same as percentage sales, is it just that you're spending on different things to what you were spending on previously? It just feels like there's quite a lot to go far from a technology perspective. So I was just kind of wanted to understand how you're thinking about that?

I think it's a great question. It's one that I asked the team a lot. I think we're in the right place at the moment for what we're doing. And remember, I think this year, we'll be pretty close to 2%, probably hit 2% next year as we think about what's in the pipeline at the moment. You don't remember, -- for all the technology things that are happening, we do have quite a long kind of product life cycle. So we don't have the fundamental churn that underpins maybe people who have higher percentage of R&D spend. So I think it's in the right place. I ask the team all the time, are we doing enough, are we spending enough? I think we are. When I step back, I know it stepped up gradually to 2%. But with the revenue growth, that spend and the acquisitions we've made, that spend has doubled in the last 4 or 5 years. So we're spending many more absolute pounds than we did before and of course, within the margin progression that we're setting out here, I think we've got flexibility. If we see a pickup among our customers for some of these technologies quicker than we anticipate, and we've been quite conservative because the industry is conservative. But if we see more of a pickup, I think we've got the flexibility and optionality to push more investment into certain areas if we need to. So it's in the right place for that, but I think we can do a bit more if we need to. We'll see how it plays out.

And then secondly, and I'm not sure quite how to ask this, but ominously, if you think about a lot of -- currently we talked about, for example, like globalizing some of the procurement or thinking about it more kind of holistically at that global level and where sort of the business service has been shared in the models kind of -- a lot more kind of integration, I guess, at the global level now. Not withstanding that you've got the single ERP system in minerals, which obviously, from a visibility perspective, must help. But I guess what I would worry about is understanding who owns those costs, given that previously these were presumably individual P&Ls and are now kind of been amalgamated into the global number or a global number. So long way of sort of saying kind of confidence around the practicalities of understanding how people are going to manage those costs or how you're going to manage those costs?

That's another good question. And Andrew step in. But I mean the way we're thinking about it is we want to retain P&L ownership, so driving growth, customer proximity, fulfillment, P&L is owned by the regions, but we are mandating through a central manufacturing control team that when you make this stuff, this is where you -- this is how you'll make it. You'll make it in the same way. You'll have optimized bills of material and routines and standards that are absolutely the same everywhere, so we can decide what's the best location to manufacture in. So Andrew has built a team and maybe you can talk about some of the capability of that team that is going to drive that. So I want to incentivize the regions to own the P&L and the bottom line and delivery, but drive process efficiency into everything they're doing from a fulfillment and supply chain point of view. And that's been a bit of a cultural shift for the division. And Andrew, you might want to touch on that. But again, back to what I said earlier on the incentives point, I think we've got real alignment now about how we're going to do that, but maybe given...

Our regional P&Ls are run regionally, that will not change there in control of that, and that's really important, back to our response with customers. That's something that's absolutely paramount, but Italy is back to that providing global expertise and a global framework. So back to bringing experts in particularly years of lean help and train people bringing in procurement experts, leveraging some of our best-cost country sourcing in that area fundamentally drives opportunities. And what's held us back has been, again, not having that common underlying platform. It's very hard to compete and contrast and show people you may want to look at this. And what I found is, in terms of our regions, for example, if we do identify a good low-cost source of a particular component, we might want to buy, the regions dive them themselves. Indeed you have to sometimes manage globally. This supplier cannot have oil capacity, and we have regions looking to push to use it. So I don't have any concerns around the regions not wanting to do. It's about making it easy, making it systematic and being able to drive that common approach globally. But the regions that own that income statement, they own the customer. That's something we made sure we're protected in this area. And that's why Jon said we are business services side, which is a partner to run cross-group, cross-divisional. A lot of work has gone into how is this going to work, who has responsibility for what? How do we manage it? So we've been very cognizant about through this whole process around want to make sure that the business still can operate, still can focus on the customer, and they understand how all these things will work and how they can use them. So it's very much about us putting them in a position to optimize their performance.

The other thing, Andy, is just you know, obviously, our regional vertically integrated model served us very well through COVID and supply chain disruptions. So we don't want to lose that kind of network flexibility that we have to be able to move stuff around if we need to. But it's trying to get the best of both worlds with -- through what Andrew has been talking about driving low cost into the places that we can do that to deliver cost reductions, but making sure we don't have a single point of failure in our sort of supply chain and fulfillment channels, and we have the ability to be resilient and move things around as we need to. So it's kind of a best of both worlds approach.

It's Rory from UBS. I've got 3 on HPGR or dry processing more generally. Can you just remind us what Iron Bridge has done in terms of revenues this year and what you'd expect for next year? That's question one if I pause actually, okay.

What's Iron Bridge done in terms of revenue?

I mean next year, we have a service contract that will be kind of mid-teens millions. In addition to that, we have spare parts or other products and services around it. So fundamentally, it will be 20% to 30% type range in total. The plant ramps up over the next 18-plus months. Again, it takes time to fully ramp up. But yes, the service contract kind of kicks in and that's combined with around HPGR, including services [indiscernible]. And again that's a great driver for us into 2024.

Great. And then thinking about overall aftermarket intensity of a redefined mill circuit versus a traditional mill circuit. Because obviously, HPGR is going in where maybe one of your competitors would have had a SAG or Ball Mill, but you've clearly got some pumps in the downstream part. Yes, I'm just trying to get sort of high-level picture of what that aftermarket intensity looks like or where mix can perhaps go in the future if that pipeline starts to convert?

I think I will answer that because as we look at it, I think it's going to be consistent with the ratio that we gave for the whole kind of group, which is $1 of OE is going to drive $0.30 of revenue. I think in aftermarket, when you combine everything that sits across that redefined mill circuit, I think that's the sort of ratio we're going to be looking at. And of course, it's going to -- each product has a slightly different ratio. But on average, that's what we're going to sit on the tailings and pipeline duty, kind of very standard aftermarket opportunity for us. And the stirred mills in the case of Iron Bridge, they're not ours, but as we sell now more of stirred mills through our affiliation with another supplier, STM, then we're going to have aftermarket opportunity in those stirred mills as well going forward because they're rubber lined and that will wear out. So it's kind of consistent with the overall divisional group average.

Okay. And then just lastly on the competitive landscape, both in dry processing and across the group. Are you seeing any significant moves there from the other players if dry processing is sort of a threat to their key product set. And then also in ESCO and slurry pumps as well, I guess, there's been a bit of M&A in the space. Are people running to catch up with you? Or are you fairly confident in your moat in those legacy markets as well.

Well, first one, I'm very confident in our moat and the barriers to entry that we have for our key brands and products. We've talked a lot about that today, sort of obvious what they are. And when you look at our peer group, then we will -- we have a bits of overlap here and there, but we always do slightly different things, and we bump into each other and nudge into each other. So I don't think anything has really, really changed. I mean 10 years ago might they been sat here talking about, well, so and so is talking about growing slurry pump strategically and we've got -- there's a couple of players who've got HPGRs. We think we've got -- there are different competitive perspectives on how good they are. But I don't think anything fundamentally has changed. I think it's been sort of part of the warp and weft of -- you actually got quite a consolidated group of suppliers, and they have bits of overlap.

It's Jonathan Hurn from Barclays. I just got 3 questions, please. The first one, just on your margin bridge from 17% to 20%, how do we think about mix within that margin bridge? Obviously, movement to OE can be quite detrimental and obviously aftermarket quite beneficial. But how do we think about that from -- getting from the 17% to 20%. We assuming basically a broadly consistent AMOE mix through the next few years?

Yes, we are. And for the reasons I talked about earlier in terms of CapEx cycle and actually just the scale of the aftermarket business now and the compounding growth volume that we have it's quite difficult to see how OE can accelerate in such a way that it might give us too much of a headwind on mix. And I think as we've shown in the first half of this year, actually, where we did have a mix headwind, we still delivered margin expansion because we have plenty of levers to overcome that. So as I sit here today, not expecting a massive shift in the mix, I think actually, we could cope with a reasonably meaningful shift. If there's a huge CapEx cycle, bingo! We love that. And that might make it a bit harder at the top end, but it's not something -- and we've done a lot of analysis of it, as you would imagine, but it's not something we'll worry about as we sit here today.

Okay. And the second one was just on M&A. Obviously, you've talked about acquisitions, and I think you said you're happy to do M&A even if it's margin dilutive, at least in the short term. I mean what kind of time frame are we thinking for those acquisitions to kind of get you back to where you want to be in terms of margin?

Yes. I mean I wouldn't take margin dilution for a very long period of time. We would seek to get margins very quickly up to the point where they're accretive exactly as we did with ESCO. I mean you go to that case study, 600 basis points of margin improvement since we acquired the business. So up to the bottom end of the minerals range, which is where we promised it would be. So I think we've got a good track record of doing that with larger acquisitions. And from a return on capital point of view, our sort of standard will be our WACC within 3 years is how we think about it. Obviously, want them to -- any acquisitions to be accretive. You'll take a little bit of margin dilution for a short period of time, but through synergies and growth, expect to get that back to at least the average of the existing group not better.

And the last one, maybe just a sort of a longer-term question. But if you look at ESCO and we look at minerals, is there anything [indiscernible] within those businesses why they can't ultimately do a very similar margin. So I think in terms of what we're thinking from here, obviously, minerals is going to do better ESCO. It's going to probably move towards that sort of 20% level. Obviously, minerals however. Longer term, could they converge at some point, do you think?

Yes. Possibly, not by 2026, but I think they'll move up in sync, as I said earlier. And then if you think -- step back and think about it, why is minerals slightly ahead at the moment in terms of the margins, and we'll stay ahead. It's probably really a volume thing because if you think about the scale of minerals and the global opportunity, ESCO still -- it's a smaller business, there's more opportunity to grow outside of North America and with more volume over time, then there could be potential to get closer to minerals.

Mark Fielding from RBC. Yes, 2 stroke 3 questions, one of the typical 2-part question. But I mean the first one is actually in your plan, what are your wider assumptions around the cost inflation that you're seeing and the sort of normal offsets that you also have to produce to deal with that over the next few years in addition to the benefits of the incremental cost plan?

Yes. Very broadly speaking, we're expecting a much more benign cost inflationary environment than the one that we have seen over the last 2 or 3 years. Obviously, the area that is still inflating a bit is wages and salaries, and that will probably endure a little bit into next year. So as we think about next year, we're planning relatively modest price increases relative to where we've been to just offset that. The tail of the cost inflation that we're seeing. And in the 2 or 3 years after that, we're probably in an environment where inflation remains benign, and we're back to the sort of average low single-digit price increases that we would normally get through the cycle. That's the planning assumption for now. Of course, the world is strange at the moment and things may change. But I think as we've demonstrated over the last 2 or 3 years, whatever happens, we've got the ability to manage through that and protect our gross margins.

And then I suppose at the end of this process, it still feels like while the margin would be very good, your SG&A as a percentage of sales will probably still be at the higher end of the mining equipment peer group. And do you think there's structural differences there? Or is it that actually there's more to do and this is been a 2-part. It's notable that the Business Services savings plan is the one with the least increase in this. And I just wanted a new CFO coming on board, seems to have a background in some of those areas as well, whether there's still more to be thought about there?

Yes. Well, we certainly hope that Brian will come in and kick the tires and have a look in terms of what we're doing, given his background. But no, look, I think as we step back, we've got a track record of saying, we're going to do something and then delivering on it. And we've done that over the last 2 or 3 years in the first phase post our transformation. This is now Phase 2 of us moving up towards best-in-class in terms of what we can deliver from a margin point of view. Our focus over the next 2 or 3 years is now going to be on absolutely delivering that alongside our other commitments, as we have done structurally on our SG&A, yes, I think it probably is a bit higher amount because 2 things we are more vertically integrated than some of our peer group from a manufacturing point of view and our service and sales presence, as we've talked about, which is a great strength, probably also has a higher cost than our peer group, but that's a cost that we are really, really willing to bear because it is one of our barriers to entry, and it's what underpins the growth. So for us, we will move -- we'll obviously improve our SG&A overall. Structurally, it may remain a little bit higher. And when we get to 20% in 2026, then we'll think about what are the further opportunities.

It's Bruno Gjani from BNP Paribas Exane. So the step-up in margin, it's ambitious, it's impressive, but there's a large self-help component to it. So when I take a step back, it actually looks a little bit conservative because to get to the 20%, essentially, we're saying 3% organic sales growth over the next 3 years, that drops through at a 30% drop-through. What are your growth assumptions in terms of top line over that same period? Is it safe to assume mid-single digit to high single digit, is 7% within the realm of being delivered. And if that's the case, kind of drop through of 30% to 35% also be delivered over the same time frame. Because if that's the case, then the margin in '26 can be pressed towards 20%, which would put you, I guess, on par with some of the best operators in the space.

Look, I think, first of all, we felt it was good out today. We wanted to be very clear that, that is within our control. And hopefully, you've -- I think you said it. You've seen today a lot of the detailed granularity of action plans that sit behind delivering on that margin. So that's why we've put the margin target out there. That's why we feel very good about it. The reality is, yes, we are expecting growth over the next 3 years through that program. And as I said, that growth assumption at this point in time is towards the lower end of our through-cycle guidance. That's probably where we are in the cycle. If the cycle is better than that, and fantastic, but I think it's really early to call that just now for us.

Got it. And if we just go back to the HPGR pipeline, I understand you don't disclose the specific number. But when I go back to 2017, the Iron Bridge order would have been in there, and that was close to 100. And if it's 8x, is it safe to assume that HPGR pipeline is above GBP 1 billion today? And then just secondly, could you perhaps add some color around the brownfield part of it. What is the typical conversion like on the brownfield side? Because I guess you have greater visibility. Is it, say, 2 years when it enters your pipeline and it converts? And then sorry, just lastly, how much of those I guess, orders in the pipeline never convert? Is it 10% or what kind of rough proportion just don't come through for whatever reason?

All right. Well, I'll answer the first question, Andrew, maybe you give just a bit of color in terms of the sales opportunities and what we're doing. But as Andrew said, we're not giving an absolute number on the pipeline because it's commercially sensitive. So we're not giving a number on the pipeline. Suffice to say, it's kind of materially bigger than it was back then. And there are some big projects in there. So they may or may not happen. I think they probably will over time, but it is a question of timing and when they will come through. But back to what you heard in Andrew's speech, I think we feel that we've now got a really big reference site, those HPGRs at Iron Bridge are the largest format. HPGRs anywhere in the world, they are going to demonstrate exactly what that kind of redefined mill circuit will do. I expect customers to still continue to be conservative, but we're sort of really trying to show leadership and move the dial in terms of actually this is really transformational. You saw the numbers, and we hope it comes through quicker. But in terms of some of the specific initiatives on driving the HPGR growth, Andrew?

Yes. I mean I think the greenfield piece is the hardest to call. It takes longer to convert logically in brownfield. Even in brownfield defined, it could be tough to call when a customer get over the line on HPGR project, but fundamentally they do realize quicker. And when they do, we used to talk about a go-get ratio. When they do decide to go, we get the majority of the HPGRs, although that continues to be the case. It's predicting to go precisely when. So that's the part where, again, maybe the last few months, you see with all financing rates, et cetera, customers reworking their numbers. But as Jon said, I don't underestimate the value of Iron Bridge and just showing the plant working in case because it's always has been a case in mining, everybody wants to be set in terms of new technology [indiscernible] but nothing that can mention more. So we've already had customers who take them to the site and show them around. So that's why I would expect the brownfield start to come through pretty quick, and we remain confident that we will get more than our fair share of work and of those that do convert because we know only position out many of them. It's just back, it's tough to predict exactly when they come. When they do come, even in a brownfield case, it tends to be major reengineering projects, you are talking 12-month-type lead times to delivery because a lot of engineering goes around it. But yes, that gives you an idea of how we can see it coming through.

And finally, just on the redefined mill, could you give us a rough sense of just how much larger the pie is for you, if it is indeed larger? Is it a 1.2x opportunity relative to the traditional mill circuit or just any additional color there would be useful.

I think for us, I mean, before, again, we were never -- we don't provide SAG mills, Ball Mills. So for us, this is a whole of white space we've moved into effectively. So for us now on a greenfield copper mine, the opportunity for our equipment portfolio is a multiple of what it was before on the OE side. As Jon said in the aftermarket, the ratios because again, we focus where we know we can differentiate based on our hydraulics or mechanical wear and tear, so it drives the aftermarket. So yes, I mean, back to that compared to the last cycle that we lived through, if there was another mega cycle, we have a far broader range of top quality differentiated technology that would mean that the opportunity per 100,000 concentrator is a multiple of what it was fundamentally a slurry pump business.

Yes, even with -- if -- Iron Bridge where the order was placed in 2019, 4 years later, if that opportunity came again, we would have a bigger addressable market in that mine than we did 4 years ago. So it's constantly growing, right.

It's Max from Morgan Stanley. Could I just ask you show that slide where you had the kind of market shares across minerals where you had sort of very strong ancillary pumps and less strong in some of the combination. Could you talk a little bit the margin differentials? And I mean, should we be worried? I mean, I've seen slurry pump margin numbers that are sort of in the mid even high 20s. I imagine your other parts of the business are quite a bit lower. So could you give us any kind of feel of where the margins are of those divisions? And it does feel like a lot more of the growth will be coming from the maybe comminution and the cyclones. So how do we think about that from a mix perspective? And I assume you've thought about it. So how do we get comfortable with it?

Yes. I mean, right now, the comminution margin is more OE for sale than aftermarket, back to when that couldn't get commissioned. And so right now, that's more the future of the margin differential. The core aftermarket margin, the parts supplying is not too different and indeed, we see opportunities to continue to actually improve that. So again, as we get scale and we do the things I talked about, we know we can lift the margin as we leverage that. So there's less differential on the aftermarket mix. And I think perhaps you're implying.

And then maybe you talked about the sort of business services where you -- I think you talked about there was a lot of duplicate workforce. So across all of those plans, do you have a number in mind or how many people are actually leaving -- how many people will leave the group, what the actual kind of employee reduction might be from all of the work that you're doing?

It's actually relatively small in the scheme. I'm not going to put a number on it because, obviously, we're in processes at the moment, which we can't talk about, but net-net, it's going to be a relatively small number across the group. It's the arbitrage of moving these jobs to low-cost locations where we can benefit from economies of scale and then elimination, duplication that labor arbitrage is really going to drive the savings, but it's not a huge number of people.

And just finally, it's a bit more of a housekeeping. But I mean when we think about the central cost line, do you expect to see kind of some of the benefits coming through there? Or just for sort of purely modeling purposes, do we think about it kind of mainly coming through the vision.

The way I would think about that, Max, is to say that assumed central costs will remain flat for now. So we will be getting some savings from where business services through central costs, but also we've got inflation coming through, and we're having to -- the world is such that we're having to invest more in compliance and reporting and so on. So I think if you think about central costs, the kind of inflation because of those things you're seeing will be offset by savings. So just assume it's flat for now.

And just one final one on the HPGR. So you've obviously shown kind of it's quite compelling when you put one of these in the energy savings. I guess what I'm curious about is if we think about kind of all of the mines that are out there, where is the technology kind of most applicable? And what is the kind of realistic target market within existing mines? Is it very relevant for 20% of them? Is it 30%, 50%? Because I know it's not every mine is suitable for this. So how do we think about that? And then secondly, just how do we think about the payback for a customer investing in one of these, if they were to on a...

Sure, yes. I mean I think it's applicable in most mines, it's not all mines, you're right. It really it comes down to, again, what's the moisture content, particularly in the ore, but it covers across all commodities back to particularly hard rock iron ore, it's an application across all of that. So we know it's applicable in a big range of mines, both earlier today and will be there in the future. Sorry, second question was in terms of the...

In terms of the payback...

Payback, yes. Well, again in terms of our products back to what is the operating cost from it. And that to me, the real benefit is back to, if you can save 40% of energy. Energy is a massive part of the running cost. So the payback is absolutely there. So that's why we should talk there about in a corporate example, the fuel flow sheet typically can get up to sort of 20% operating cost reduction. So the payback basically pans out pretty quickly. The overall CapEx is a little bit more in the traditional circuit, but it does pay back pretty quick. And that's why, again, most flow sheets that you see now coming out for greenfield more and more is designed around an HPGR type circuit because of that.

But most of what you're doing is brownfield expansions rather than necessarily any kind of replacements of existing SAG mills or anything like that?

Again, brownfield expansion depends on what you mean. So again, we talked about modular for some time, you would if you want more capacity in existing mine. You can put an HPGR side by side. So capacity constraint is a mill and you want a major additional capacity. You can run an HPGR to the side and then run back into the flotation type circuit. So it can work model side by side often in mines, perhaps more common in brownfield pipeline is major expansion. We're putting an additional concentrator line or you're reconfiguring a whole line to basically upgrade and that's why, as you can see from the pie chart, not quite half-and-half, but the brownfield is a big portion of it because of that. So yes, we wouldn't looking for a 3% increase, but we'd be looking for a substantial step-up. It absolutely can be used.

Yes. But if you do a modular expansion like that, the payback will be weeks probably. Yeah. Okay. Any more for anymore?

It's Ed Maravanyika from Liberum. I've just got more of a kind of, I guess, a bigger picture question. ESCO got you closer to the rock phase into the mining pit, would you look at other acquisitions that did something similar that had other more upstream adjacencies?

I think where we are today is that we've got -- we've created a very clear bookends for our business. We're the earthmoving machines. ESCO hits the dirt right through to concentration and tailings at the back end of what mineral does. And I think there is -- as you hopefully have taken away today, there's a lot of loads of opportunity for growth between those bookends, organically for sure, if we can do bolt-on acquisitions for the kind of reasons we talked about earlier to accelerate our strategy, fantastic. But I think we're out of phase now for the next few years where we want to allocate our capital to grow in that space. So that's going to be the focus. Okay. Wonderful. Well, thank you very much for coming along today. Thank you very much for all of your questions. I hope you enjoyed it. And of course, I think we've got a few drinks next door if people have the opportunity to hang around for a little while and we can take any further conversations and catch up a bit socially. So thanks again for coming. I really, really appreciate it.