Trifast plc (TRI) Earnings Call Transcript & Summary

Good morning, and welcome to the Trifast plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company will review all of the questions submitted today and will publish responses where it's appropriate to do so. Before we begin, I would like to submit the following poll. I'd now like to hand you over to Scott Mac Meekin, Interim CEO. Good morning, sir.

Thank you, and good morning, everybody. I'm joined by Darren.

Darren Hayes-Powell, I'm the Chief Financial Officer.

And by Dan.

Good morning. I'm Dan Jack, and I'm COO.

So if we just dive in a little bit to the highlights for '23 first. I think we would have wished slightly -- for a slightly better year. It was a dynamic, if not challenging year for sure. But through that, I think the team performed really well and came with, in the context of that year, pretty substantial results. Certainly, on Dan's team, record contract wins is a real important highlight for me because I think that indicates that the -- all powerful and super important connection between our people and our customers remains as strong as it ever has been and/or stronger, so congratulations on that and I think that's a great success. The pandemic also brought us a lot of challenges in terms of inflation pressures and there, again, Dan and the team responded on pricing, pricing increases and so on. There'll be more in the presentation about all of this, for sure. Through the back of the year, it became apparent that there was both an opportunity to, call it, improve the organization structure of the business, particularly in the U.K. and there was a need for a cost rationalization exercise, so-called Project X, which we kicked off in -- at the end of the year and is carrying on as we speak today. And I think this project has been really important, both from a cost reduction standpoint, cost rationalization, but more importantly, from a long-term efficiency standpoint. It is a project that will position Trifast more succinctly or more strong -- very strongly in the heart of the U.K. industrial base, and I think is also an opportunity for simplification through the operations and organization, which will lead to lots of benefits in terms of customer service and long term. The other side of that project is that we have built a substantial upside in the capacity. And I think that's a strong testament to what I hope comes through the presentation, which is a strong degree of confidence in the midterm. That said, a lot of work needed to be done to unwind the inventory working cap position that had been accumulated through the pandemic. And I think Darren and Dan did an excellent job working through that as well as their teams' really, really fantastic work. And we've been able to bring down, as you will see in the presentation and the details from Darren, we've been able to bring down the inventory about to where we were when we started into this last year, and we've set some targets at sort of what does good look like at 22 weeks, and Darren will expand on that. And so I think working through a rather complicated year, but still a lot of growth, some cost rationalization, some substantial exercise to reduce complexity and cost in the business and a customer refocus or a customer centralization -- centricity exercise, I think those things combine to really provide us the confidence to carry on with our dividend policy and connect through to a 1.5p dividend, which you will see as a 7% upside. So with that, Darren, maybe the next slide, yes. Then, I think we've communicated this slide before, and therefore, why we put it in this time was really to illustrate the point that we're on the same set of targets for the midterm. So we're very much targeting the same area with a slight improvement in the return on capital. Darren, just a few comments.

Yes. So the return on capital employed was a target of 10% to 15%. We've updated that to 12% to 16% now. That actually reflects the banks our confidence in the UOP and how those dynamics of those 2 metrics go together.

Thank you, Darren. And so if we go to the next slide, yes. So if we then look forward into '24 plan and beyond, where we're concentrating our effort, we -- as I said in the first slide, we've started this customer-centricity project and underpinning -- underneath that are a couple of programs that Dan is going to explain in a little more detail, so called Global 200 and true profit and HYMS or high-yield market segmentation. The purpose of those tools or those lenses in that strategy. The purpose of that is to really focus in on what is the ideal customer for the group, to rationalize the customer base around those ideal customer and customer relationships, to set in place the visibility that allows us to then improve the engagements with our key and core customers and as well prospects going forward. So that really allows us to rationalize in this period some of our activity costs and some of our transactions out of the system, but also allows us the lens to look forward and make sure we're on the right track. If we then look at the point 4 on the slide, what we've done here is we've changed the organization structure, which was predominantly weighted around functional management orientation. We put in place very much a line-driven, market-oriented organization structure, which is very much helping us in terms of both simplicity, a clear balance between authority and responsibility, but also really allows us to be more tightly connected to the execution of our strategy. And part of that strategy is building this national distribution center in the U.K. And I think integrating -- we've integrated the European leadership organization, together with the U.K. organization and that just makes it much more simple. There's also a cost reduction in that, but the fundamental reason was to make it a more aligned and more streamlined organization structure. And then I think the final point here, as I stressed earlier, was around the inventory or the working capital in general, which includes the inventory and also a new bank facility that Darren will explain as we get further through. So all things taken together very much customer-oriented, customer aligned, building on the legacy of success of 50 years this year, success of being very customer focused and really taking that hopefully to the next step, which puts in place for the next 50 and beyond. So with that, Darren, maybe some financials here, if you will, please.

Okay. So if I take you through some of the financial KPIs that we've got here, as Scott referred to, we had a challenging year in FY '23. And you can see the impact on our profitability and our side, that side. And I will take you through in a couple of more slides, a little bit more deep dive as I unpack that. But I think 1 of the key things to look at this, 2 key metrics that have shown great performance. One is our growth. And again, I'll take you through more detail with Dan in a moment, but also that we've got our working capital under control. And again, that is something strong for us into the future. So if I unpack these KPIs in a little bit more detail. If I start looking at first about the growth. So it accounts for the exchange rate, we grew 9.1%. And if I take you through the regional numbers, I'll then hand to Dan to talk about a little bit more about the sector detail. But if I go through 1 region at a time. First, Europe grew by 10.4%. We saw growth across most of our European businesses. And we are really particularly pleased with the TR Kuhlmann, our German business, after taking some of the European distribution business from our U.K. division, performed very well in FY '23. However, they were impacted or was with TR VIC, our Italian business, as the home and health sector started to reuse at the tail end and start of FY '23. So overall, though, we're very pleased with the 10.4% growth in Europe. If I then make us to Asia, Asia is a story of 2 halves. The first half, we saw both our contract and distribution business performing exceptionally well. And as we discussed in our last announcement, in quarter 4, we see -- saw 1 of our large Asian Health & Home customers start to destock. In essence, as soon as they started destocking, we managed our working capital, which I'll talk about. But it also did cause us to actually have a drop-off of sales in the last quarter of FY '23. If I then take us down into North America, North America, we saw some great growth at -- obviously, at 50.3%. Exceptionally good growth, obviously from a low base of which 28.5% was organic growth and 28.8% was actually due to the Falcon acquisition of 5 months of sales. But what we're really pleased to see is our North American new team plus the integration of the acquisition of Falcon has really shown North America to really perform well, and we're really excited about the future in that region. If I then take us down to U.K. U.K. overall remained flat. This is after the transfer of the European distribution business to Kuhlmann, but we saw some great growth, both in the light vehicle, energy tech and infrastructure sectors. So overall, we're very pleased to see all the regions have actually performed in FY '23. And if I hand it to Dan, I'll just go through -- Dan, you can just go through some of the sectors.

Yes. Thanks, Darren. I'm just going to pull out a couple of things to talk to. Firstly, heavy vehicle and light vehicle both saw great growth in our last year, and predominantly, that comes from 3 places. Firstly, price. And we've talked to you about price not being a project, but being an ongoing permanent set of metrics that we put into our total sales community. And so price drove the revenue of heavy vehicle and light vehicle. So did volume and volume comes from 2 bases. One was new business, and we've called out record new contract wins of GBP 25.6 million. Some of that started in FY '23. And then volume through supply chain availability of microchips. So we will have seen in FY '22 and FY '21, a decline in demand because microchips weren't available and really did impact our revenue from those sectors. What we see now is an availability improving. Less bad, less often is how we describe that in FY '23. And even in this year, we still see there's a stuttering of availability from time to time, but we see that improving in this half of FY '24. Health & Home, Darren has already alluded to the fact, particularly in Europe that we saw a decline in demand. Inside Health & Home, there is what you might call white goods or domestic appliances. And clearly, that is a consumer confidence, discretionary spend item that is impacted by macro influences, that's inflation and cost of living and interest rates. And those things have created a decline in demand, particularly from H1 into H2 of FY '23. And it's fair to say that we haven't seen a bounce back of that. So destocking hasn't been replaced by restocking as we go into FY '24. But that said, inside in Health & Home, we have seen an uptake on specific things related to health, personal fitness and also to medical, to well-being as institutions invest in equipment that is there for the long term. And then the final one I'd touch on is distributors. It's a long-standing sales channel for us at TR. I'm very proud of our distribution channel. But by default, distributors are there to serve the needs that are immediate, where people don't have inventory and they need to buy it off the shelf. We saw that decline as the industry was over inventoried in FY '23. And so people would buy from us less often through the distribution channel, and that has actually continued into the first half of this year. Thanks, Darren.

Thank you. So if I take us down to the next metric or into the operating margin subject. If we do it in the constant exchange rate, the operating margin percentage dropped by 2%. And if I unpack that by region again, so firstly, Europe dropped by 1.4%. This is very much driven by the inflationary costs that we saw in our TR VIC factory, especially in energy and raw materials. We have actually, by the end of FY '23, have put pricing mechanism in with our key customers to ensure that we fairly pass these costs on to our final customer, but it did impact us during FY '23. In Asia, we saw an increase of plus 2.6%, which we're really pleased about with the tailing off because of the Health & Home destocking of 1 of our key customers. But we really got some great performance from our distribution businesses in Asia. So we're very happy with the overall Asian performance. North America, as we've talked about with the new North American team is actually from a low base, has actually moved from a negative into a positive, so a growth of 4.3%, but we're really pleased about that. And again, we're talking about how we see that grow in our lower index North American business. And then U.K. U.K. was the biggest drop. This dropped 3.1% and it's probably in 3 areas to talk about. First is the net inventory reduction, which we did as we clean up the inventory. And I'll talk a little bit more about that when we talk about our restructuring what we plan to do in FY '24 and into the future. We also saw all our 3 distribution business start to tail off that caused us some financial impacts as referenced by Dan earlier. So -- and we also had the transfer of the European business from our [ TR U.K. ], which is our largest distributor to the European distributor business, actually moving down into Kuhlmann. But overall, we saw a 2% drop. But if I unpack this further and talk a little bit more about profit before tax and the dynamics and how that actually hits the bottom line there. So as you can see, we've seen a drop of GBP 4.5 million. If I take it into the major ones, major elements, we talked about the growth, the revenue growth, that's actually given us a positive impact, as you can see, is the first blue bar. The other impacts that we've actually faced into our margins is first about -- when we talked about the slow up of the destocking from the Asia business from 1 of our key Asia customers, what we immediately did is actually slowed up the factories. This means that the factories did not fully absorb all the overhead costs, and therefore, there was an impact to our finance, but it was to ensure that we manage our working capital, which is why we're very focused on working capital as part of our day-to-day activity. The second element was an increase in the net stock write-offs. We see this on a global basis. But the net stock write-off actually impacted our gross margin. And then the inflationary activity that we take normally across the globe, but especially just to point out that TR VIC inflation, especially due to energy, which was -- came up exceptionally high during FY '23. The other area is overheads. Overheads have increased. First, the investment in people. We've alluded to the North American team that we've actually built up, but we've also built up the global team, both the global supply chain and a global sales team to actually help the overall regions as we grow our market. We also had compliance teams that we put in place during FY '23. Other factors was Atlas or D365, our largest distributor, TR U.K., was fully now live and actually the cost of D365 licenses and that part of our cost as we are ongoing business as we move forward. And then overall inflationary impacts, things like audit costs and professional fees that are continuing to cost us more as we go forward. And then the other element to make sure and I'll talk [indiscernible] banks on the banking page is also the inflation that we do -- the interest rates that we do actually have grinded us at the moment and the cost of actually serving our loan facility. They are the key drivers and the profit before tax. If I move us on now to more of a cash orientated or the net debt side of things. What we've actually got is I'd like to focus probably on the working capital first. One thing we're very happy with is we have actually brought our stock levels back down to FY '22 levels. And if you remember at half year, they went up. We've now brought them back under control. So we now have 29 -- at the end of FY '23, we have 29 weeks of inventory, and we have a task and a real drive and target to actually bring that down to 22 weeks by the end of FY '24. So a big focus on working capital. Creditors obviously improved as we've actually brought down our inventory, but we'll get back to a more balanced level and we focused, of course, on debtors as well. So overall, working capital is very much of a laser focus that Dan and I take as we manage our working capital and put initiatives in place to actually improve that over the next year. If I then move us on to the next page. Banking facilities. At the end of FY '23, we had GBP 10 million headroom, but what we did and what I'm announcing today is that we also negotiated a new loan facility this -- June this year, in FY '24. And it's actually 2 parts. First is we've renegotiated our RCF at GBP 70 million; and second, with the support of the U.K. Government for an export development guarantee, we've actually got GBP 50 million now that we've supported over a 5-year term. This allows us GBP 120 million of facility. This gives us opportunity for our strategic investments into the future when we get back and we're rightly positioned to do what we want to do on acquisitions and investments. But I think what we're pleased to see is our leverage that we come with that. We are managing our leverage at 2.19x. And during FY '24, we've now actually broken below the 2x level, which [indiscernible] and focused ways of actually bringing leverage down. So very pleased with making sure we have facilities and loan facilities for the future. If I move us on to other items. We talked -- Scott talked about at the start about the restructuring. We have -- we are restructuring our U.K. operational base, so we have 6 sites or 6 more small warehouses. We are centralizing to a national distribution center in Midlands. We've actually now have the leases actually signed and we actually have the keys and we're starting to fit that national distribution center out. We're excited about the future of this. We see this being a savings on an annual basis of greater than GBP 5 million, and we'll start to see some of those savings at the end '24, but during FY '23, we actually put a charge to the accounts on restructuring of GBP 4.2 million, GBP 2.8 million of that being cash orientated, most of that being redundancy payments. But again, we're excited about the future of what the NDC will bring as we get the efficiencies and the increased capacity to develop that market segment. Okay. And then if I move us now down to strategic, and I'll hand over to Dan.

Yes. Thanks, Darren. Yes, this slide is intended to really talk to the point that both Scott and Darren mentioned earlier in the deck, a commitment to our midterm targets, in particular, focusing on our underlying operating margin. I'm going to walk you from left to right. Of course, you can see our FY '23 position. And on the far hand right side, you can see our midterm goals, 10% and greater 10% to 13% being what both Darren and Scott have reiterated already. The first block really ties a little bit to what Scott and Darren have referenced in terms of our national distribution center. It's clearly bringing about a productivity by reducing our footprint. It's not just that. We're looking at all of our group services. We're looking at data and technology to be an enabler of efficiency. And in particular, we're very keen as we grow, not to see a linear relationship between revenue and operating expense, to bring about efficiencies on a daily basis and on a structural basis. And we see that adding accretive upside to our current operating margin. The middle bucket that you can see there really addresses 2 things. Firstly, of course, it says purchasing and supplier focus. But what that actually means, it means, firstly, that we have created an organizational structure to overcome some of our inefficiencies of the past. In the past, we have been talking to the same supplier across different postcodes and countries. But we have built an organizational design in the last 2 years that creates 1 voice of TR to our supply base, which we value very greatly. When we take that organizational design and we add the data from D365 and the unification of data and part numbers and aggregation of demand, that gives us a more leveraged conversation. And as we do that, we improve not just price points. We also improve the balance sheet through credit term negotiation. Inventory turns improve through near-shoring or through consignment agreements with our supply base. We really see that as an upside that overlaps both between operational improvements, supply improvements and even into customer enhancements. The final column here, it's says G200 and HYMS, which is something Scott referenced at the beginning. And the next slide unpacks that a bit further. But to say twofold. One is, as we grow, as we win new business, we continue to win at accretive margins, and that's very important for us. And secondly, that the price conversation that we talked about with regards to ensuring that we pass costs through to our customer base, we continue to do that on a periodic basis, something that we review constantly rather than once a year or when inflation headwinds require to do so. So moving a master memory here to provide a price which customers are prepared to pay for as they recognize our value. And we focus then typically on the ideal customer, which takes me on to the next slide, please. Darren. We have a rich history at TR, 50 years of history, frankly, where we have always been, and I trust we always will remain entirely customer-centric. We have a focus on customer service and customer relationships, which I think is exceptional and almost unique in our industry today. But what we have done also has been all things to all people and what we need to do and what we are doing is bringing our focus into a much narrower funnel of customers with upside. The first place we go is to measure it. So it's something that we've talked about a lot internally is called true profit. It's a lens of performance at a transactional level. Think about it as EBITDA minus the cost of working capital. That allows you to work true profit at a transactional level. Once we have that in place, that allows us to work out the profitability on the commodity, customer, a sector, a region, salesperson. That allows us to make decisions. Some of those decisions might be to address price, to reduce OpEx costs, to do something differently with the customer. But it also shows us where we make money and where we can then focus. And so they're truly profitable customers. We take that lens and apply it across our Global 200 customer base. Our G200 then goes through the lens of true profit, and at the same time, we apply a perspective on their growth, the compound annual growth rate that is greater than our average. So we're looking for more profitable, faster-growing customers inside our own customer base, first and foremost, and that can be by adding part numbers, that can be by adding services, that could be out by adding locations, growing that business as a default. And then alongside those customers that we've identified in the high-yield market segmentation looking at their peer community, looking at the TR100, the target 100 customers that are peer groups to those G200 customers. So it's not overly complicated. It's not rocket science, but it creates simplification. It creates focus across the entire organization and allows us to have a confidence in outcomes, but in the past, at least have been a little bit [indiscernible]. Darren, if you could go on to the next slide. Now we've often said that this industry is very sticky. Not easy to penetrate new companies. So how might we go about addressing those target customers than our peers to profitably fast-growing customers. And often, there's an inflection point of change. So that change might come through legislation, like the right to repair bill, that came through the EU and the U.K. That said, all sorts of appliances to stop them being disposed of in landfill, needed to have the ability to be repaired. And therefore, you stop welding something and you start screwing or unscrewing something. That created a greater degree of faster content and allowed us to have conversations with customers and want-to-be customers in equal measure. Likewise, emission standards change, as we all know. And so electrification and hybrid powertrains have become a norm in our vernacular. But in reality, a few years ago, it was considered something of a pipe dream. Those changes to technology design allow us to have engineering bias conversations at the design stage that allow our parts to be specified in early on. And frankly, for us, the earlier on, the better. And perhaps then to address that, too, we develop our product ranges in anticipation of these changes. Knowing that certain parts and fasteners change design as things are like weighted or made stronger or made smaller, the faster content changes. And so we're leaning to our engineering community, our customer-facing community and our own intercompany manufacturing competencies that brings about an engineering-led innovation. And the final slide down for me is on sustainability. Two perspectives to bring to this slide. Firstly is our supply chain partners. We have supply chain charters in place with our partner suppliers. To ensure that they have those responsibilities, both at a social and governance level, but of course, at an environmental level that allow us to confidently step forward and say that we're meeting our own expectations. That's a learning curve, that's a partnership, that's a transition, that's a progress. And likewise, with those supply chain partners, we're also looking at the opportunities to nearshore so that we can take out costs, we can take out time and pace. We create pace by taking out time. We can improve our stock turns. And frankly, we're also able to avoid any carbon taxes that might be around the corner from just legislative change. The other perspective is with customers, customers changing their procurement strategies, thinking about either disruption through geopolitics on the other side of the world and/or meeting legislative standards from, say, the European Union, which we've done recently, a Swedish well-known truck manufacturer, legislated or mandated that the content of the bill of material, the Europe -- it could only be Europe, it couldn't be anywhere else in the world. And so we were able to take our TR VIC facility and the investment we made there, combined with our supply chain partners within Europe and provide a solution to our customer that resoundingly was a success. So whether it's a customer-driven, diversified-driven, balance sheet-driven activity, these come together with a focus on sustainability.

Yes. Thank you. Okay. So I hope this picture of this business illustrates a business that has a very long-standing and a very proud legacy of customer commitment. We're taking that to the next level. We're simplifying and rationalizing the amount of customers that we want to work with, which allows us to focus on those customers, which we engage with in a very proactive way. We've also simplified the organization structure, which brings about a whole opportunity of change in that area. We've implemented sprints now in our management. So we're running our projects in quarterly sprints, which just -- is just increasing the pace of execution, which I think is quite an important piece. Certainly, we have some sectors which with the economic conditions in the background, some will be less beneficial or less positive than us. There's -- we're dealing with that. And I think we're dealing with that in a very positive way with the team. We've been able to -- I hope that this presentation has been able to demonstrate that we've been aggressive where we have to in taking complexity and cost out of the system. And we're doing it in an intelligent way with smart lenses, so to speak, about where we can actually see strategic opportunities in conjunction with cost reductions. So I hope that has -- that message has come through. Lots of care, a lot to work. Darren and Dan have worked really well and really hard on working cap, in getting working cap sorted out, primarily inventory, but right across. And with Darren's refi, that's obviously a huge opportunity for us when we're back on track where we want to be and able to get back to investment in acquisitions, as you said, Darren, and I think all that combined should really give us a clear view of statement of why we were able to stay with our dividend policy and bring that to the market. I think going forward, whilst what we're implementing today is dealing with the urgent with the quarters at hand, obviously, we have no choice. We have to do those things. We've made a lot of changes in the 4 months or whatever it is that we've been working on it, but those are changes which are also setting in place the foundations for future growth, and this gets us to why the statement about the midterms and the confidence we have in the midterm targets remains intact because we see so many opportunities in this business going forward. And I hope that looking forward the next time that we have an opportunity to speak in public you will hear about a lot of really exciting projects that we've initiated that will be concluded by then. So I think that for me is what gives me the excitement to really have the confidence in where we're driving this business. So I see this as an amazing opportunity. Yes, challenged. So it's a balanced message that we have to find here challenging background and enormous opportunities with great people in this business. So with that, I'd like to close the presentation and ask for questions.

Scott, Darren, Dan, thank you very much for your presentation. [Operator Instructions]. I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. As you can see, we have received a number of questions throughout today's presentation. Could I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.

Sure. Darren, do you want to take this question on margin.

So there's a question actually being given through our margin for the U.K. So I've talked a little bit about that when I've talked about, obviously, the impact we've got in FY '23 was really in 3 areas. So just to repeat that, and obviously, that's the distribution businesses and the transfer to common business from TR U.K. This is just the U.K. element of the margins and also stock write-offs are the key drivers in that side as we start to look at the U.K. But that's part of the reason when we talked about restructuring the U.K. to actually -- now actually put down the cost improvements, but also get an efficient organization in the U.K. from the national distribution center that we're doing in the Midlands.

Sure. Thank you, Darren. Dan, do you want to take this question on growth?

Yes. There's a question that says, where do you think you will see the greatest growth geographically? Where is your focus, U.K., U.S., Europe, et cetera? I think if we took it at a percentage level, certainly, we see the growth in the U.S.A. being the fastest. Darren called out a relatively low base earlier on our 50% growth in the last year. But it's also 1 of the largest manufacturing industrial hubs in the world. And so the North American focus remains significant. Darren called out the fact that we had invested in our team there and we continue to do so. So I would say that at a percentage level, for sure, the U.S. will probably grow fastest. But in sort of quantitative pounds, we also see the European business growing significantly as a result of some of these contract wins. Of course, we're aiming to grow all our businesses profitably over time. But I would say, if you're asking specifically and for sure, the U.S. would probably be the 1 to call out most.

Yes. You want to speak 2 minutes about what's gone on in Asia, that might be useful in terms of growth as well.

Yes. So our Asian business, as Darren called out earlier, had grown 2.6%, '22 to '23. Within that, we had some mixed dynamics of Health & Home destocking and our own obviously manufacturing servicing distribution. We sit right in the heart of Asia across several occasions, and we're bringing about right now an organizational design that is intended to maximize the G200 program that we talked about a few slides ago, with a sales force that is entirely focused on growing truly profitably as it were. And we're putting in resource there, Jeremy Scholefield, who is part of our global leadership team is spending the next 2 years working through the development program with NDC and the other leaders in the area.

Dan, there's 1 more question. Everybody wants to ask you questions today. So 1 more about price.

The question here is, how have price increases being received by customers, given new wins, et cetera? I still -- I assume you still remain competitive. So firstly, the price increase reception from customers, I'd say that all customers have a robust conversation with us, no customer high fives, of course, are paying more for the components received today than yesterday. What I would say is that the team, and it really is a team game, have been able to articulate the reasons why costs have increased and why we need to recover that value. And there's been a maturity of that conversation over time. Sometimes, it's a mechanism that we can apply to large customers. And sometimes, it's just a discreet price conversation. We haven't lost any major customers throughout that time period because we are so customer-centric, like I said earlier, and the relationship that we have with our customers on the whole remains intact and healthy and yes, we do remain competitive. But where we focus our competitive strength will be around an engineering bias led conversation, not just standard parts for standard applications.

Okay. Thanks, Dan. Darren, there's a question about the strength of the pound, et cetera, FX.

Okay. So we are a global business, obviously, having the American division that we've talked about, obviously, the growth of [indiscernible] large proportion of that organic, some of that actually the acquisition of Falcon. So yes, there are things, but what the key things we're actually seeing at the moment is as we have our loan facilities in different currencies, so that allows us some natural hedge and we do because we have a global business, actually allow us to offset some of these currencies across the globe. So we are utilizing really natural hedging. That's the key thing to actually manage that currency.