TT Electronics plc (TTG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. It's now 8:00, so we will begin. I would like to welcome everyone in the room and on the webcast to the TT Electronics 2023 Full Year Results Presentation. It has been a few years since my last plc presentation and -- but it's good to see a number of familiar faces, some in the front row here. And so it's good to see you, and I look forward to meeting you again and also getting to know those of you that I don't know too well over the next few months. So that will be good. And I know it's a very busy morning this morning. I can see that on your faces. So we thank you for making the effort to come here this morning at 8:00, but our intention is to be finished by 8:45 to allow those of you that need to get to the next presentation time to do that. And so that I don't get into trouble with the next company that's on the list. So without further delay, I would like to explain what we're going to cover today. I'm really pleased to have our CFO, Mark Hoad, with me this morning, and he will take us through the 2023 results that show a year of strong delivery for TT with good progress made on all of the key priorities set at the start of the year. I'm then going to give a few first impressions of the business and share some of the things that I have seen firsthand during my visits to our operations following my arrival last October. And then I will share where I believe we have an opportunity to unlock further value and the intention is to explore this more at the Capital Markets event on the 9th of April. So we will set that out for you today, but the detail will be on the 9th of April some of those. I'll also give you the details on the outlook and specifically how we have clear visibility on delivering on the group's 10% operating margin target in 2024, which is the big hurdle for the company. We will then have Q&A from the room and then from those on the webcast. And before I hand over to Mark, I would just like to publicly thank him for making my introduction to TT as easy and effective as it has been and for showing me the ropes of an understanding of some of the business opportunities that we've got within TT. So I'll hand over to Mark now to take us through the results. Thanks, Mark.

Thank you, Peter, and good morning, everyone. At the start of 2023, we set out 5 key priorities for the year. I'm pleased to be able to report that we've delivered against every one of them. We delivered a GBP 23.9 million free cash inflow with cash conversion of 92%. Leverage was reduced to 1.7x. We expect to reduce this further in 2024. And with the divestment announced on Monday, it's already taken it down to 1.5x on a pro forma basis. Margins have continued to improve, up by 110 basis points to 8.9%, excluding the pass-through revenues. And this was, in large part, thanks to significant improvement as expected in the performance of the Power & Connectivity division. For the group overall, delivery against our order book resulted in an operating profit improvement of 16%. As Peter said, and we'll show you shortly, we're on track to deliver 10% margin in 2024. On this slide, you can see the overall financial metrics for the business in the year, many of which I've just covered, but there are 3 points in particular that I'd like to draw your attention to. Adjusted operating margins were up by 110 basis points to 8.9%. Pass-through revenues are now starting to unwind and will continue to do so through this year and next. 16% growth in operating profit, combined with cash conversion of 92% meant that not only was there a strong free cash inflow and reduction in leverage, but it also meant that return on invested capital improved by 150 basis points to 12%, nicely above our pre-cost -- pretax cost of capital and, therefore, generating shareholder value. Moving on then to the revenue and profit performance in each of the divisions. The recovery in Power & Connectivity that started in the second half of 2022 has continued and picked up pace in 2023. Momentum continues into 2024. Revenue increased by 10% organically, and adjusted operating profit increased by more than 80%, resulting in adjusted operating margins up 330 basis points to 8.4%, benefiting from operational leverage and good efficiency gains. As well as delivering on growth, we completed the fit-out and transfer of the Ferranti business into a new facility in the Greater Manchester area in the second half of the year, positioning that business for further growth. Second half margins were 9.4% with a strong order book and as I'll come on to the benefit from the divestment, we expect to see the business move back into the 10% to 12% margin range in 2024. GMS continues to perform strongly. Although headline revenues were down, when you strip out the impact of foreign exchange and the unwind of about GBP 10 million of pass-through revenues, revenue was broadly flat on a like-for-like basis as we anticipated after a couple of years of very strong growth. We expect a similar reduction in pass-through revenues in 2024. Even with like-for-like revenues broadly flat, adjusted operating profits increased by 16%, benefiting from pricing and ongoing efficiency actions. GMS is now delivering margins at 10%, excluding pass-through revenues. GMS establishing new capacity within the existing TT Mexicali facility in the year, and as a result, is now able to offer increased choice to its customers around where product is manufactured as they look to diversify their sources of manufacture, and this has positioned GMS for further growth. Finally, Sensors & Specialist Components, where revenue increased by 4% organically. Adjusted operating profit was down by 13% at constant currency, reflecting the GBP 3 million impact of the HVAC system breakdown in Plano that we've highlighted previously. The review of the HVAC system has now been completed, and this issue is now fully resolved. As highlighted previously, order intake has been normalizing with inventory levels in distributors having increased over the course of 2023. We are now seeing inventory levels start to reduce and expect them to return to more normal levels in the first half of 2024. So while intake from distributors remain subdued, overall order intake in S&SC has started to improve, thanks to new business won in 2023 from a number of blue-chip customers. With the lower order intake in the second half of 2023, 2024 revenues for the division are expected to be lower. However, we expect to be able to mitigate the profit impact of lower revenue through cost actions which are in hand and with the resolution of the Plano HVAC issue, which, as just noted, is complete, but profit will be more second half weighted in this division. We talked previously about free cash flow reaching an inflection point in 2023, and I think that's clear to see in this slide. We delivered cash conversion of 92% in the year and a material step-up in free cash flow to GBP 24 million. There was a healthy level of investment in capital and development expenditure, including establishing the new facility in Manchester and new capacity for GMS in Mexicali. Working capital improved in the second half of the year with an GBP 8 million inflow, of which GBP 7 million came from inventory reduction. And as a result, there was a modest working capital inflow for the year overall. There was any limited cash exceptional spend, and this included some of the costs of preparing for our recently announced divestment. And in December, the U.K. pension scheme made an initial refund of surplus to the company of GBP 5 million less 35% tax. With strong free cash flow, debt reduced and this combined with EBITDA growth meant, meaning that leverage reduced from 2x at the start of the year to 1.7x as we exit 2023. And we see leverage reducing towards the bottom end of our target range by the end of the year, and that will give us options. Earlier this week, we announced the divestment of our sites at Cardiff and Hartlepool in the U.K. and an associated facility in Dongguan, China, referred to internally as Project Albert, rather than having to keep list those 3 sites. These business units mainly provide electronic manufacturing services and connectivity products to industrial customers. We're committed to the remaining businesses within the GMS and Connectivity portfolio, which have a higher quality customer base in our target markets with more differentiated complex products, offering good visibility and low revenue churn. The divestment gives us a simplified operational footprint, removing 3 of the 21 operational facilities from our portfolio and is a meaningful step towards making TT a more profitable and resilient business. The divestment is expected to enhance TT Group margins by 50 basis points to 70 basis points with a 70 basis point to 90 basis point impact in each of the Power & Connectivity and GMS divisions. Headline sales proceeds are roughly GBP 21 million on a cash and debt-free basis, subject to a normal completion accounts mechanism. As a result, net debt and leverage will be reduced further. On a pro forma basis, year-end 2023 leverage will be circa 1.5x. The 2023 results reflect a noncash asset held for sale write-down of circa GBP 32 million, and completion of the sale is expected by the end of the first quarter. As reported previously, in November 2022, we completed the buy-in of our U.K. defined benefit -- defined benefit pension scheme. The trustee is now working through the final data claims ahead of moving to the buyout of the scheme. We expect this to be completed towards the end of the year or early next, and we'll then move to progress the wind-up of the scheme. There is now an increased level of confidence that the scheme will have a surplus when all member benefits have been secured. And as a result, in December, the trustee agreed to an initial refund of GBP 5 million out of the surplus. We're now in discussion with the trustee regarding the quantum and likely timing of a final refund of surplus to TT. In January of this year, we also completed the buyout of our much smaller U.S. defined -- U.S. defined benefit scheme for a cash cost of GBP 1.8 million, leaving the group now with very little in the way of defined benefit pension exposure. Here, I've set out some items relating to guidance. I'm not going to go through all of them, but there are just a few items that I want to highlight. Firstly, I've given some pointers here to help with the moving parts on revenue, with the key point being the 3% to 4% of organic growth, excluding pass-through that we anticipate. Secondly, as I mentioned upfront, and as Peter will show you in a minute, we're on track to deliver 10% margin in 2024. And finally, I've set out the various moving parts within cash flow that point to conversion of 90% plus again in 2024. We're delighted with the inflection in free cash flow that we've delivered in 2023 and now expect another year of strong free cash flow. That, combined with the disposal proceeds, should see us moving towards the bottom end of our target range by the end of 2024. That will mean we have balance sheet capacity. And at that point, we have optionality as to how we deploy it. So in summary, before I hand back to Peter, a really strong year of delivery in 2023, and I remain excited by the prospects for TT and the opportunities that we've identified the team to improve execution going forwards. Peter?

Thank you, Mark. I've come across TT many times in my career as a supplier. And so I was really excited when the opportunity to lead TT came along. As most businesses, TT has clear strength but also had its challenges. And I was really interested to understand how it was really performing and the opportunity that it has to progress. So over the last 5 months, I spent time visiting almost every site with only a couple left to visit in the next few weeks. I have met with colleagues to understand their thoughts, visited a number of customers and spent time with some of our investors. And I am more excited about the potential for the business now than I was when I joined and our ability to unlock further value. So why am I excited? Or some of you that know me is I'm always excited, but -- so why am I really excited about this? Well, what I've seen during my visits, and as I have worked with my colleagues over the last few months is that we have a really strong platform from which to grow. And the issues we have are mainly within our control, things that we can do and are related to execution. The markets we operate in are good growth markets. Aerospace and defense, health care and automation and electrification are all underpinned by long-term structural sustainability drivers. And I've been really impressed with the industry experts within our sites. You understand these markets. They help us develop differentiated product and technology that help us work with our customers on solutions that lead us often to be embedded on programs for many years. That is an important point that differentiates us to other industrial companies. At the end of 2023, we had nearly a full year of revenue cover, of which 9 months relates to 2024, well above historic pre-COVID levels, with further visibility from our multiyear programs well beyond this and outside of what we report in the order book. The quality of our customer base and the geographic footprint of our manufacturing plants provide me with confidence in our ability to scale up as we continue to grow, and we have some real talent to deliver this throughout the organization. So whilst acknowledging the things we do well, there is an opportunity and requirement to improve our execution, commercial focus and refine how we think about innovation to unlock the significant value within the company. I have seen examples of inefficiency and complexity in the business that often gets in the way of us having a clear path for growth despite being focused on structural growth markets. As I've already said, I will provide a detailed view on these opportunities and what this means for TT at the Capital Markets event. But there is a lot of potential. And one example that I would like to share today relates to the management structure. I believe our structure has hampered some of the opportunities to share best practice by being focused on the business unit or division rather than maximizing the resources within the company. A different approach going forward would support improvement in efficiency, growth and innovation, and all of these are important to us going forward. And there's one thing I'd like you to take away from today, it's that we are laser-focused on disciplined execution to drive shareholder value. And we are not waiting to get going, the business is driving towards improved performance and there is good momentum. Mark has already outlined the improvements in 2023 and in particular, a real momentum shift in the level of cash generation and a good improvement in operating margin. And earlier this week, we announced the divestment that is part of the plan to improve the quality of our earnings, strengthen the balance sheet further and bring a more disciplined approach to the business. This is a good foundation from which we will drive future growth and profitability. It is important as a team to execute our plan and deliver an improved financial performance. You can see on this slide that is our intention in 2024 to achieve an adjusted operating margin of 10%. This is within our control and is all about execution. As you can see in this bridge, pass-through revenues continued to unwind this year, perhaps not completely, but down to a very low level. The Project Albert divestment is expected to close by the end of the first quarter, and therefore, this benefit to margin is already confirmed. The HVAC issue that we identified in one of our U.S. sites is now fixed, and we have taken appropriate action to make sure we will not see a repeat of this fault in 2024. The final element required to reach the 10% requires an element of growth and efficiency gains to make up for the cost inflation and other headwinds. I am absolutely focused on execution and efficiency, and we have good visibility on the growth given the quality of our order book and planned sales activity. And so as you can see, action on the major components for achieving the 10% have already been taken. And the final element is a key focus for us, and I'm confident we will deliver this in 2024. So whilst we are mindful of the wider macro environment, I am looking forward with real confidence both for 2024 and beyond. We are well placed in structural growth markets, and based on the strength of our order book and the initiatives already underway, we have clear sight to make further progress in the year, delivering 10% adjusted operating margin and bringing leverage down further. I'm really looking forward to sharing with you more on how we are going to unlock further value and setting out our medium-term financial targets on April the 9th. So for now, that is the end of our presentation, and we will take questions from the room, followed by those on the webcast. Thank you.

It's Harry Philips, Peel Hunt. Several, unfortunately, if I could. Just looking at the sort of 3% to 4% organic revenue growth thought for this year and then balancing that up with flat GMS and flat Sensors, I'm sort of just struggling a little bit with that maths basically, which is undoubtedly an error on my part. The -- in terms of working capital in that environment, where do you think that sort of goes again with those sort of similar dynamics of 2 businesses sort of reasonably flat? And then the -- again, I guess around the same issue. You got that all packed again, just so I think all of us have sort of commonality on that, that would be great.

Yes, sure. So in terms of the growth, yes, the divisional shape is actually the Power & Connectivity obviously has got really good momentum. We talked about the fact that the order book has been -- our order intake has been running ahead of strong growth in the division. So that division is positioned to continue to grow really nicely. GMS, I think, will be growing. Obviously, this year was a year of consolidation after, I think it was 37% growth in 2022 and something in the teens the prior year. So this is always going to be '23 year of consolidation, but it is now positioned to grow again. So I think it will grow in the mid-single digits probably is realistic. But S&SC will go backwards from a revenue perspective. So that's where order intake has been slower. What we're saying is that the profit will be flat. So we can mitigate the reduction in revenue through cost action because of the HVAC claim. Against that backdrop, working capital, look, it always slightly depends exactly what happens in the sort of the quarters preceding the period end. But with some growth across the year, we're assuming small outflows in working capital. As we said, we did deliver some inventory reduction in '23, which is really encouraging. And there's more we'll be going after, but we're assuming for now small outflow, we still get to a really good conversion and strong free cash generation. Order book visibility, Peter talked about the 11 months for the group and 9 months [ specifically race into ] 2024. The shape between the vision -- the divisions is still similar. GMS has the most, so it's basically fully covered. Power is next. It's well covered. And then S&SC, because lead times have come down, therefore, the order intake comes down accordingly and you get less visibility. If you go back in time, it was a kind of 8-week to 12-week visibility business. It's probably got about 5 months of orders in the order book. So still very healthy. But with lead times having improved, we can be booking orders through into Q3 and still have the ability to deliver in this year. And then the last point on the divestment, yes. So the sort of the big picture numbers are, it creates about a GBP 50 million revenue reduction in '24 and full year effect is GBP 70 million in '25, and the operating profit contribution is sort of 4% to 5% margin. So it's about GBP 2 million profit impact in '24 and GBP 3 million in '23, but some interest benefit partially offsetting that.

Vanessa Jeffriess from Jefferies. Just on pricing. So if we take the pass-through pricing and put that aside, what else is happening in pricing across the business, particularly in Sensors, when you're seeing that destocking? Is it a bit more competitive?

I think we're seeing -- obviously, it's a competitive market. However, there is a lot that we can still do within the pricing, and we are doing that. So we're thinking about the inflationary increases and making sure that, that is covered within the pricing, and then we're looking for opportunities where some of the contracts are -- there's opportunities to do some things. And in others, there isn't. So it's a kind of a mixed bag within there. But there is more focus on pricing.

And then when you think about the volume declines you're expecting for Sensors for the year, what kind of visibility do you have over your distributors? I guess, I mean, I know you see that inventory levels, do you -- I mean, do you generally know how they're feeling about things or does it come back quite quickly without you knowing?

Yes. So we get really good visibility of the data related to our products within their portfolio. So we can see all the inventory. We know what their point of sales data is, i.e., what they're shipping afterwards. They also give us a sense of what they're expecting. So I mean, hence, my comments of the expectation that through H1, inventory goes back to normal levels and once inventories return to normal levels, they will start reordering.

Richard Paige from Numis. A couple of questions from me. I'm intrigued, obviously, I don't want to steal the thunder from the CMD, but intrigued by the comments about management sharing of ideas. Is that an issue of incentivization or getting people together in a room more regularly or something? How do you...

I think it's more related to structure, Richard, and -- as I said. So my intention is to kind of explain that in a bit more depth on April the 9th, so that we can talk that all through. But I want to break down the silos, and I want to break down where people are not necessarily working together where they can be working together.

And then secondly, might be related to Vanessa's question on pricing. But I guess seeing these disposals, it begs the question of the variability of margins across the group still in existence. Is it quite wide or is...

It's less wide now.

But in terms of opportunities...

Yes, there's opportunities to do better is one of the levers. I think we've got lots of different levers to pull. That's one of the levers. It's not completely across the whole board. So we just have to identify which bits we -- what we need to do and what is okay. And we're still working through all of that.

Okay. Brilliant. And just one for Mark probably just to finish off. Obviously, Sensors is going to be second half weighted, just clarify at the group level, how you expect the year to look?

Yes. So -- I mean, the other 2 divisions will be more evenly weighted. Power in '23 was, I think, sort of 40-60. It was going to be better than that. GMS probably pretty evenly weighted. So yes, Sensors is most notable.

Just a couple of questions from me, please. Mark Fielding from RBC. Firstly, can we talk about capacity utilization. I'm just curious where we are in different parts of the business. And obviously, particularly in part, that was one of the restrictions on GMS and you've been adding there. So just curious how much runway we've now got for the future? And then the second question, and again, not looking to steal from the Capital Markets Day, but just the implication of the cash comments and things, cash conversion, et cetera, and the helpful guidance slide you provided is that we're not looking for significant cash exceptional on an ongoing basis, and that's definitely sort of that period is behind us. Just double checking that.

Yes. So on capacity, I think our previous comments were relatively GMS-specific. As I say, it's been through some pretty extraordinary growth through '21 and '22. It was, I think, from memory, 18% and 37%. So it was -- particularly in North America, it had a really good run was, would begin to bump up against capacity. So us putting the additional capability into Mexico does 2 things for us. One, as I say, it gives the customers' choice, but it does put some capacity there. There is some products that we will be able to transfer out of the Cleveland facility into Mexico. So that recreates capacity there that can be better used for things like aerospace and defense type contracts where it's a bit more sensitive, and we've got the accreditations there to do that. So yes, I think that from a capacity point of view, we're sort of back in a place where all 3 divisions can be growing. And I mentioned Ferranti, for example, that's a facility that has good expansion opportunities there. Cash conversion, yes, as I say, [ '23 ], a real inflection, really pleasing. We talked about getting this business to GBP 20 million of free cash flow, and we've done it, and we will do something like that again in 2024. And yes, you're right, the inference of that is we do not expect large cash exceptionals going forward.

And just to add on that, I suppose as I've gone around and I've gone to each of the sites, I don't see any restriction in terms of utilization. We've got plenty of room to go.

Stephan Klepp from HSBC. I have to come back to Richard's question. I'm really sorry here. But well, it's probably as well a preview to the Capital Markets Day, but you've seen a lot of sites. The company has done a lot of M&A. You have ample of capacity. You said it all yourself. So -- and you said at the same time, no adjustment items, yes. But you basically described the pretext of probably some complexity reduction via emerging plants, moving production as well because you're coming from that background. And I'm rather thinking is it all that can be done on the complexity reduction merging some entities and having people talk better to each other? I mean, that can't be the big next thing for you guys, right?

There's plenty of things to do. And what we're saying is no major restructuring costs and exceptionals to execute the plan. okay? So we have a number of things, Stephan, that we'll set out at the CMD that of things that we can do that will improve the performance of the business in the medium-term. And -- but there's lots to do, right, in terms of the future. So we'll set out that, and then we'll talk about the kind of longer-term plans after that, but we've got to get the first bit done first. But there's no major exceptional costs.

I think the thing you've got to bear in mind, Stephan, is when you do big site moves and close sites, it consumes a lot of cash and that has been holding back our free cash generation. And it's a big distraction to the team. These things take an awful lot of work, and it's something that distracts from executing effective on the organic opportunity. So is this business how you design it with a blank sheet of paper? No. But can we get a lot more out of this business from the footprint we have? Absolutely.

Should we think -- should we continue to think in 3 divisions? Is that going to be the future of TT as well?

Well, we don't want to take anything away from the CMD, do we, Stephan?

I have to ask. Sorry.

Well, yes, that's fine. And we'll tell you all about it on the 9th. Any other questions from the room? Do we have any questions on the webcast? No? So if there's no further questions, I know it's -- [ Mark's ] got one. I was trying to get quick before Mark had another one. Mark?

I'm going to ask some really boring analyst type question quickly at the end, which is just can you...

[ Normal ones ].

Yes. So talk us through the tax rate, et cetera. It's really boring analyst questions. But yet again, started the year looking for around 25%, finished it at sort of 21%-ish, outlook for next year, [ 24% ] for this year, as we are now 25%. Just how do we think about the moving parts in the tax rate?

All credit to our Tax Director, [ Kirsty, who's ] in the room. We had some good news in the year. There were some losses that we were able to recognize that we hadn't anticipated. And then we also got some benefit in relation to U.S. tax -- U.S. R&D and foreign tax credits. They both have sort of effectively a prior year benefit, and we've baked them into the current year rate. So that explains why the rate came down to around 21%. But we do not expect those sorts of things to keep in, again, for this year, hence, guidance is 25%. Could we end up with a bit more good news once we file tax returns? Yes, it's always possible. But I think 25% is a safe place to be forecasting and hopefully, we'll do a touch better if we can. I guess the other point to make about tax is that we've now utilized pretty much all of our historical tax losses. So the cash tax is going to move back to being much more in line with the P&L expense.

And then actually, just a quick question on orders. I mean you talk about things. I think there's some point about things normalizing and indication that, therefore, Sensors is back at a point where maybe that's going to start improving. I mean, actually, the backlog at 11 months, it just hasn't shrunk.

Right.

So I suppose, wider question at times, you've talked about the backlog sort of going back. I know you're not to pre-COVID levels, but just do we think that backlog ever comes down? And what is the current order momentum in the business sort of sequentially? How is that panning?

Yes. So you're right. We last -- mid of last year, we were talking about 11 months visibility saying it's going to come down a bit and maybe it settles around [ 9% ]. It got to [ 10% ], it's more like [ 11% ]. Obviously, that does move around a bit depending on what we're expecting from a growth perspective. But yes, it might come down a bit, but it doesn't feel like it's going to come down materially from those levels. I think this feels like normal, and that's in part a reflection of the kind of wins we've had on kind of the kind of contracts that Peter referred to with much longer visibility. It's all part of the direction we've been taking in the group. From an order intake perspective, I referred to -- I talked about distributors being weaker. But for the group as a whole, we saw Q4 order intake move sequentially better than Q3. And for S&SC in particular, the start of this year, orders are already after 2 months, materially ahead of their Q4 intake.

I'd also say, just if you think about the end markets that as we're looking at it, Mark, aerospace and defense are still both looking very strong going into 2024, and we're seeing those ticking up. We had a good year with them last year, and we think that will continue. The programs that we are on in those particular areas are often long-term in nature, so there will be a multiyear sort of contracts. But we're also seeing this -- when we're looking at the distribution and the change, and we think that, that's sort of an inflection point, we're seeing those order intake starting to pick up, which will benefit us in the second half, we can't see that it's going down much from what we see at the moment. We think we're in a good place for it going forward now and to keep ramping up a little bit. So I think it's positive momentum that we're seeing within there. So we feel we're at the most probably bottom from where we have been based on the markets that we're supporting. And aerospace is, in particular, is doing very well.

So you asked boring analyst questions, then you give Stephan a chance to think of another difficult one.

Yes, sorry for that. Yes. Stephan Klepp again from HSBC. Sorry again for asking that. So your divestment was a surprise, yes. So you didn't really flag it well, which is good, yes, because you're selling something. But I wonder, is there -- are there more skeletons in the closet somewhere hidden away that you sell other businesses where you can't turn the curve and get the profitability to the level where you want them to be? Do you have like a percentage of sales of the group where you say like, these guys have to improve significantly to underwrite to be part of the group?

I think where we're at, at the moment is the -- what we believed is not core for us going forward has been identified and that has been dealt with. What we're now focused on is efficiency, growth and innovation. And so as we work through all of that and we work through all of those planned, we'll see how that all works through the various parts of the business. But there's no planned further divestments at this point from the current portfolio. But we have to keep moving forward, and we have to keep on making progress. And so we'll keep looking at that, and we'll keep reviewing that. But at the moment, I think there's real opportunity with what we've got left to do a lot more with. And I think if we do what we're meant to do and what -- and if we're disciplined and we execute that well, we will see a significant improvement in the performance of the business.

And then probably last one, I promise. If you think about divesting stuff, yes, and you did that. Doesn't come a point where shrinking to glory is as well done? And the question becomes from your clients of scale and size, are you big enough? Are you subcritical in some areas? Or do you think you have the right size to serve your blue-chip customer base globally?

For the markets that we serve, the niche areas, the engineering expertise, the manufacturing expertise, I think what we provide is something that a lot of other companies don't provide. What we need to do is find more of those customers. We've got a really good geographic footprint, okay? So that's really helpful. And we can provide a service that, as I said, a lot of other companies cannot do. We need to do that better, and we need to do more of it. But the size and scale of the business at the moment, I think, is good. Right. Thank you very much, everyone. Thank you for attending.