Warehouse REIT plc (WHR) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the presentation for their half year results of Warehouse REIT for the period ending September of this year. My name is Andrew Bird. I'm the managing Director of Tilston Partners, the investment adviser for the REIT. And I'm joined today by Peter Greenslade, Finance Director, who will talk to the balance sheet and earnings; Paul Makin, Investment Director, who will take us through the valuation and some of the asset management initiatives before handing back to me. First slide. Once again, we've seen material growth in the value of the portfolio, increasing through a combination of revaluation uplift and acquisitions. The half year has risen by from just under 800 million square feet to a value of GBP 907.1 million, of which GBP 35 million is attributable to new acquisitions. In each case, we acquired assets adjacent to existing holdings, where we have specialist knowledge of the micro market over and above the wider regional market, and we think that this will continue to ensure that we drive double-digit returns from new acquisitions. The like-for-like valuation increase amounted to 9.4% in the period, supported by like-for-like ERV growth of 2.5%. The revaluation produced an EPRA NTA increase of 12.8%, up from 135p to 152.4p per share, growth driven primarily by the revaluation increase of 17.33p per share. The positive valuation movement has been a key component, when combined with the dividend for the period, delivered a total accounting return of 15.1p (sic) [ 15.1% ], up from 9.5% this time last year and on top of the 27.7% at the Mach year-end. Dividends totaling GBP 0.031 per share paid or declared in respect to the period are in line with our full year forecast of at least GBP 0.062 per share. In addition to the investment acquisitions, we've also exchanged contracts to acquire another 16 acres of land at Radway Green in Cheshire, and we've also post-period submitted a planning application, which I'll talk to later on in the presentation. Whilst we manage the portfolio, we also strive to ensure our reporting functions are amongst the best-in-class, recognized this time by EPRA with another gold award and also supplemented by the most improvement -- most improved report in their Sustainability Best Practices awards. Next slide. The 4 graphs illustrate the continued strong performance since IPO, which was back in September of 2017. On the top left, the total shareholder return of 98.1% captures the dividend and share price movement in the full year period up until the 1st of November this year. The bottom left is the total accounting return, coming in at 16%, being the compound annual growth rate, and exceeds our IPO target of 10% per annum. On the right-hand side, you can again see the continual growth of the business in scale, which doesn't need any further explanation. Each year since the IPO, we've been referencing the economic moat constraining supply of new warehouse space, which we forecast would create an imbalance between supply and demand. It seems to us that, that moment has arrived. We continue to experience unprecedented demand for space. Cushman & Wakefield report 49 million square feet let in the first 9 months of this year, again, exceeding the 13 million square feet in Q3 Interesting that for the last 6 consecutive quarters take-up has been in excess of 13 million square feet. So not surprising that they anticipate this year will be another record, exceeding the 53 million square feet taken up last year. And also, as we show on this slide, top right, the same is happening in the big box market, again, record amounts of take-up. Not only is demand coming from e-commerce sector, which was responsible for 43% of take-up in Q3, but also occupiers looking to build resilience in their supply chains. For example, the 3PL sector take-up in the first half of this year was 6 million square feet, which was more than the annual average over the last decade. We also try and anticipate what's going to happen next. So it's interesting to note that Savills have a register of current occupier requirements, which exceed 50 million square feet, a number that has been rising Q-on-Q for the last 2 years. So whilst demand continues at record levels, the supply of available space continues to decline. Cushman is again reporting that supply of available stock has dropped below 50 million square feet for the first time since they started collecting data. They also recognize that the pipeline is limited to circa 12 million square feet. So there's no material amount of new space coming online in the short term. So with record levels of -- record low levels of vacancy, it's not surprising that they, like others, are anticipating accelerating levels of rental growth. And then all of this is -- the key drivers really to the investment market, again, the slide on the bottom right, we continue to see really strong levels of volumes with overseas global investors, particularly the private equity buyers, accounting for 63% of market share. So just before I hand over to Peter, I mean, I think the stark reality is that close to 50 million square feet already let this year, only 50 million square feet available, already 50 million square feet of known occupier requirements. At what point do we run out of the space? And on that question, I'll hand over to Peter.

Thank you, Andrew. I don't propose going into great detail on the results, but aim to pull out the salient numbers and ratios. But if you have any specific questions, we're only too happy to answer them at the end. On this slide, you'll see that IFRS profit before tax increased to GBP 86.4 million, up from GBP 40.4 million in the half year to September 2020. The main drivers are twofold, with net earnings achieved from approximately GBP 170 million of acquisitions since September last year, combining with GBP 73.2 million gain on revaluation of the recent assets during the period. Andrew and Paul will talk more to the drivers of the game later, but it is principally driven by yield compression. Our adjusted earnings before interest were GBP 16.7 million, and our earnings were GBP 13.2 million. These results were 55% and 70% ahead of the half year to September 2020. Adjusted and EPRA earnings per share were both GBP 0.031 for the year, up from GBP 0.026 for the comparative period, reflecting growth in earnings for the like-for-like portfolio, together with a combination of contribution from acquisitions made over the past year. We have maintained our dividend in line with our target level of at least GBP 0.062, and the half year dividends paid and proposed total GBP 0.031, which are fully covered, and we expect them to maintain -- we expect them to be covered going forward. The strong revaluation increase together with assets acquired in the period meant that we had a portfolio valued at GBP 907.1 million at September and an EPRA NTA of GBP 1.524, up from GBP 1.351 at March. Andrew has already referred to the 15.1% total accounting return for the period, and since the IPO, this has been an average return of 16%. Loan-to-value was 26.2% at the period end. The increase in LTV over the prior period was driven by the recent acquisitions, offset by revaluation gains. But I remind you that this is below our self-imposed cap of 35%, providing scope for future acquisitions. Gross rental income was up half year on half year by GBP 7.4 million to GBP 22.6 million. This reflected the benefit of acquisitions made in September 2020, together with like-for-like EPRA rental growth of 2.4%. Property costs only increased GBP 0.3 million despite the portfolio almost doubling in size. A large part of this is due to lower vacancy costs, together with only a marginal increase in bad debt provision. And I'll talk about debt collection later. Net finance costs are up 18% half year on half year, but this is driven principally by debt associated with acquisitions. Our weighted average cost of debt remains low at some 2.1%. The EPRA cost ratio decreased to 27.2%, down 2.2%, and the ongoing charge ratio at 1.3% is lower than the 1.5% of a year ago as the REIT benefits from its scale and its size. Looking at the balance sheet. This is strong and has net assets of GBP 647 million, substantially up on the GBP 574 million reported at March, and is driven by the net GBP 73 million of revaluation surplus. Net borrowings are GBP 238 million and represent GBP 182 million of term loan, an RCF of GBP 81 million and offset by cash held at the end of September. Other net liabilities are down from the March year-end and the balance is largely represented by deferred acquisition costs for land acquired for development. The NTA bridge from GBP 1.351 in March to GBP 1.524 at September is very straightforward. As I've already mentioned, our dividends paid in the period were fully covered by earnings, GBP 0.031 and GBP 0.031, and the impact of the EUR 73.2 million revaluation gain, which translates into GBP 0.173 per share of revaluation gain, drove the increase to the 52 -- 51 -- I'll get the number right -- GBP 1.524. Before I hand over to Paul, it's just worth looking at the rent collection data since the start of the pandemic. Over the last 18 months, we've collected over 98.5% of our rents. In the quarter from June to September, we have collected over 98% and we've collected 99% of the previous quarter. So in the half year that we're reporting on, we are over 98% collected. The current quarter, which is the one on the top right and the far right, at 92%, is the period for September through to December. And we are already 92% collected and we anticipate, again, being 98 plus percent collected. And that 92% is exactly in line with the last 2 quarters collection. The high collection rate also demonstrates our continued diligence on tenant covenants and robust rent collection procedures across some 600 tenants. In short, we have good rent collection. We have no debt maturities until 2025. We also have an option to extend our facilities for 2 more years, and we have an accordion for a further GBP 55 million of debt. We have a low weighted cost of debt at 2.1%, and that's based on current SONIA rates. Our interest cover is close to 5x, and we are well within our banking covenants. We have a low current LTV and a self-imposed cap at 35%, which gives us scope for further acquisitions. And in summary, we believe our balance sheet is strong and positions us well for the future. Paul?

Thank you, Peter. For those following online, we're on Page 11. I'm pleased to say that the portfolio value, as Andrew and Peter have both said, has increased both through acquisitions and through asset valuation increase and now stands at GBP 907 million. The assets held for the period have increased by GBP 80 million or 9.4% like-for-like. But in our opinion, they still offer potential for improvement. For example, we're pleased to have delivered 2.5% like-for-like rental growth, ERV growth, during the half year. But the average rent per square foot is still only GBP 5.58. And the reversionary yield of 5.5% is based on value as ERV and I'm pleased to say we continue to outperform this ERV. During the half year, we've also successfully invested over GBP 33 million in 5 new assets, all of which we believe to be accretive to not only shareholder returns but also portfolio quality. These acquisitions were in 2 clusters. Two of the assets were adjacent to our existing holdings in Crewe, and 3 new assets in South Cambridge, creating an exciting cornerstone to our Cambridge-Oxford arc. The majority of these acquisitions were off-market, leveraging on the good track record and strong market contacts, and at a blended yield of 4.5%, we felt they were good value. And I'm pleased to say that the view was confirmed by CBRE in the recent half year valuation, where these valuations actually increased by 7%, covering all the friction costs thereon. And finally, still worth noting, that our valuation is only GBP 100 per square foot capital value, and therefore, it is still below replacement cost. And so I'm pleased to say that the land continues to be in for nothing. Turning to Slide 12. Whilst the value has increased by GBP 80 million on those assets held for the half year, this is GBP 73 million on a like-for-like basis after the accounting adjustments. And from the graph, you can see that the majority of this valuation, on the right-hand side, increase has come from the multi-let assets, increasing by almost GBP 50 million, and the smaller regional assets increased the most, seeing more than 12% increase during the period. This didn't come as a surprise to us because of those of you who were with us in May at the annual results presentation, will remember that we actually pointed out that we thought this area was where we could see some growth. It was an area where we didn't think the values had caught up with the scarcity of the stock that we hold and the type of assets. And so we were pleased to see this come through as we predicted. In terms of the portfolio weighting, you can see that we now have about 1/4 of our assets in regional distribution, which are typically our core longer income e-commerce assets; we have around 15% of the portfolio in last-mile single-let assets, serving key major urban areas; and we have almost 60% of our portfolio now in multi-let assets, again, which will include last-mile functions. Turning to Slide 13. During the year, we have continued with our strategy of improving quality and not just quantity of assets and income. Even though we have bought a few small assets to bolt on and grow our existing estates, we continue to grow the average asset size, and this now stands at GBP 8.3 million. As you can see from the graph -- sorry. It's on Slide 14. As you can see from the graph, we see e-mail -- sorry, e-commerce touches the majority of our occupiers across the size range, with 52% of our occupiers directly involved in e-commerce and many of the other occupiers being suppliers and providers of the services to e-commerce. It was interesting to note that in the take-up stats that Andrew mentioned earlier that in the last quarter e-commerce accounts for 43% of the space taken in the wider market. We continue to work with our occupiers, developing and deepening our relationships. And as can be seen from the sample of the logos there on the right-hand side, we've got a wide variety. This doesn't include some others like Selco, part of the Grafton Group, amongst others. And we're pleased to have added another 50 during the year, including Morgan Sindall and Ideal Logistics. Turning to Slide 15. This is the first of 3 case studies that we'd like to quickly talk through today as we continue to increase our holdings. The first of these is an asset that we did bring to everyone's attention at the May half -- annual results when post period end, we bought an asset in the Oxford-Cambridge arc just south of Cambridge known as Dales Manor Business Park. This is 7 miles south of Cambridge and comprised of a 68,000 square foot new multi-let industrial estate and also a Phase 2 land with a potential for a further 73,000 square foot, which has planning consent. Since that acquisition, we've actually acquired 2 further assets on the same estate, which are also marked on the plan, offering a range of unit sizes and further medium to long-term development opportunities. The total capital invested in this estate stood at GBP 29.3 million, reflecting 4.5% net initial yield. This has already increased in the latest valuation to over GBP 31 million, and being off a low basis of rent with a reversionary yield of 5%, we think this 5% still looks low considering the opportunity that this estate offers us. And as we point out in the full year results, Cambridge industrial market has been starved of new stock with the main new development being in the life sciences arena, and therefore, the industrial space being in demand. And with the majority of this estate being brand new, it, therefore, offers good sustainability characteristics such as strong EPC, on-site site renewable -- on-site renewable energy sources and with the remainder offering potential to increase EPCs through capital expenditure. This acquisition not only satisfies part of the core strategy of buying in the arc that we've talked about but also part of our strategy of bolting on to and growing our existing estates. And this strategy is already showing dividends. For example, we've got a biologistics company who's interested in taking a pre-let on one of the new build on the estate and that they couldn't move because they had an urgent requirements. And so what we've just done is we've just agreed terms with them to take space on one of the bolt-on acquisitions that we made on a temporary basis, 3 to 5 years, whist we bring forward a pre-let on the new estate. Something that we couldn't have done if we hadn't followed the strategy of increasing holdings in core locations. We anticipate that the region and this asset will perform well. And it's interesting to note that we currently have about 19% of our portfolio in the arc and our assets in the region have seen the highest like-for-like increase of all the regions at 11.7%. The turning to Slide 16. Before I hand back to Andrew, I'd just quite like to give you a quick update on Whitney, an estate that we hold just to the west of Oxford. This is an asset that we bought as part of the IPO of -- rents of GBP 5.2, and it was bought for GBP 8.6 million. You may remember that the estate house Fabulous Bakin Boys actually had the longest flapjack production line in Europe in this -- when we bought it. Sadly, they overstretched themselves and the company eventually folded. But we actually took a surrender of the lease from Daelmans, their parent company. We took a surrender at which we then spent as part of the capital expenditure on the unit. And we're delighted that during -- that just before -- just last year, we concluded our first let-in, setting a new tone at GBP 7.5 per square foot. And I'm very pleased to say that we've just -- in this period, we just agreed terms with Travis Perkins to take the remainder of the 50,000 square foot as a trade counter scheme. The deal is subject to planning and some final works, which we're now progressing very through. We've been working on this opportunity for some time with Travis Perkins, and I think their interest is testament to the quality of the refurbishment that we have carried out, the underlying quality of the buildings, the location and the visibility from the A40 that this provides. All of which has been recognized by Warehouse REIT's independent value at CBRE, who currently consider the estate to be worth GBP 40 million. That's over 1.6x the value at IPO. Strong correlation to our share price so far and I'd like to think we've got clear potential in both. We very much look forward to reporting the conclusion of this transaction shortly and seeing the benefit of the letting that this will have to the wider estate. Andrew?

So I'm just slightly clock-watching. And then just to take you through the last 3 slides very quickly because I do want to leave time for Q&A. So we've referenced development, and the important message is that it is ancillary to the key function of the business, generating rents. But we are looking at build where it can be accretive to shareholder value, build to hold for long-term income. Interestingly, we have signed 2 agreements for leases in the period. 1/3 is on the cusp of being signed. The leases under those agreements will be between 15 and 30 years. So a real commitment from occupiers to longer terms. Great opportunity to improve sustainability of buildings. If all 3 agreement for leases go unconditional, it will cover 9 acres of land, generating the order of $450,000 of income. And as we say, we want to achieve returns 2% ahead of market value for these developments. Now there is one scheme that has greater materiality and scale than any others, and that's the one on the screen at the moment, Page 17 for anyone who's remote. This is a CGI of what the end development might look like. So don't make the mistake that it's already been done. We have planning permission in place for the 6 buildings higher on the image. This is what we regard as Phase 1. We announced earlier in the year 800,000 square foot of planning permission was granted. In the period, we bought the balance of that site which we didn't already control. We had 25 of the 40 acres. The balance has come in with an exchange of contract. And post period, we have submitted a planning application for a further 1 million square feet, which is for the 5 buildings on the lower part of the CGI image. This is land we already control. Peter referred to deferred considerations in the balance sheet. Again, it's a way of managing exposure. It's greenfield land. It's allocated for employment use. And we will look to, through the planning process, secure consent for just over 1 million square feet, outlined initially. This particular image shows a response to that 1 million square feet and brings 5 separate buildings, but it's very fluid. End development of the scheme might be in the region of GBP 200 million. We've already seen rents in this area of GBP 6.25 per square feet -- per square foot. And being the motorway location that it is, we expect good occupational demand. It will be a 3, 5-year process for implementation of the scheme. So it's something that we look forward to updating you on as matters progress. Just one other point I wanted to touch on in the portfolio, and that's what we call the in-built reversion. So current contract -- sorry, current passing rent, looking at the Slide 18, top right, GBP 38.7 million. So that's what's feeding the earnings per share at the moment. But there is an in-built reversion, potentially up 29% to just shy of GBP 50 million. But more near term, you've got a GBP 5.6 million uplift in rent from the rent-free periods and fixed increases. So that's near term, think a 12-month horizon through to the contracted rent. We actually have a reversion of GBP 2.9 million in the portfolio, and there is the vacant space to let. Now for me, I regard the vacant spaces work-in-progress. We like an element of vacancy. It creates an element of churn, and we create value time and again through pushing higher rents. The latent value keeps us busy. And we've recruited a further 3 colleagues into Tilstone Partners in the period, an asset manager, a senior project manager and a property analyst, again, making sure that we have the resources to implement the active asset management strategy that we enjoy. On this slide, bottom right, the WAULT. Just going to pick out one piece here for you. There is GBP 7 million of income which is either subject to holding over rent review or renewal in the next 12-month period. And if you look through to the value as ERV, that will generate another GBP 0.001 on the earnings as we document those renewals. So finally, to wrap up -- so a good time for questions -- clearly, we all read about the changes that COVID brought to the warehouse market, but there are increased demands from so many different sources. We think our portfolio is well placed to continue to benefit. Rent is, as Paul said, less than GBP 5.6 per square foot, they're very affordable. Savills say that the rent as a proportion of supply chain cost is still less than 5%. I'd also like to remind you that the management continue to hold 6.6% of the REIT. None of us have sold any shares since IPO. So we continue to back our own judgment. And finally, can I just place on record our ongoing thanks to the Board of Warehouse REIT for their strategic support. And actually, I'd personally like to thank all the Tilstone team, all 20, who have, again, worked really hard to produce a great set of numbers. With that, thank you very much, ladies and gentlemen. Love to take questions.

Should we start with questions in the room and then we can go on?

One online and one in the room.

Is it working?

Yes.

My name is [ Andrew Singer ]. I'm a shareholder, and I've been a shareholder since before the pandemic. So I'm a happy shareholder. First of all, congratulations for what looked like another excellent set of results. My question is regarding the gearing, the LTV, which is very low at 26%. Even your target of 35% is pretty low compared to your peers in my opinion. And you obviously have growth potential. So why are you keeping it so low rather than actually seeing it more like 35%, which would enable you to grow without having to do another share issue. Haven't yet been able to persuade your Board to issue shares on the basis of rights issues, which would not dilute the NAV per share for shareholders. So obviously, I'm keen that you actually raise money through more debt. I'm just wondering what your views are on that.

Okay. So if I take that first. So we do have the self-imposed upper limit of gearing of 35%, which is a response to shareholder feedback of our wider shareholders. And we're happy with that level of debt. The model is capable of performing without higher gearing levels. Our current gearing level in the 20s is a function of 2 things really. Obviously, as the valuation grows across the portfolio, it pushes gearing down. But also, we have always said that we will only make acquisitions that we think are accretive to the quality of the portfolio. So we're not going to chase yield in tertiary locations, which we think will -- long term will be assets that underperform. So we recognize that the market is very competitive and we remain rigorous around what we buy. And if that means we buy slightly slower, we're happy to take that position. Clearly, there's an impact on the earnings. But the day you buy is the day you sell. It's got to be the right product that we're buying into. We've talked about the Oxford-Cambridge arc. It's a geography we really like. You can anticipate, therefore, that we're focused and things are happening in that area. So yes, expect the gearing to continue to rise towards that 35% target, but we need to be rigorous around stock selection.

There's an online question which aligns to that, which basically says, will there be any more acquisitions in the near future?

And I think it's fair to say that from what I've just said, anticipate further acquisitions.

I just wondered if you could sort of walk us through the difference between the 2.5% sort of like-for-like ERV growth and then I think it was the 0.9% portfolio sort of like-for-like rental growth. It sounds like there might be a little bit more to come. Just sort of how we can think about that? And then just secondly, related to that Cushman & Wakefield report, very sort of favorable data that you mentioned, and just how your regions might sort of fit into that in terms of supply and demand? And is it largely correlated? Or maybe are there differences there?

So I'm going to start, Paul, but if you want to add. So I think it's a really good question, Tom, which I think the answer lies in vacancy has slightly ticked up in the period, which you might think is odd given the underlying market that we're operating in. But when you have an active asset management portfolio, periods have a cutoff date, lettings obviously continue beyond. So we would expect -- we've always said a 95% occupancy for an active portfolio which has an element of churn is not unreasonable. So with that vacancy, accepting that a number of buildings are under offer or in refurbishment, has come down slightly in the period. So hence, when we look at like-for-like, we have to account for the buildings which were let at the beginning of the period and have now become vacant. So that drops our like-for-like passing rent, a statistic that you've quite rightly highlighted. So clearly, the active market gives us, as you alluded to, the opportunity for those rents to tick back up as we progress through the next period. I think that was -- I don't think -- was there a second part of your question?

The second part was just really in terms of the sort of regions that you're active in? Are they correlated to that sort of market report that we saw, I think, about 2 weeks ago?

Yes. I mean, it's really interesting. I think Savills were the party who broke down a commentary about regional shortages. And this isn't a Southeast London centric demand phenomena. It's across all regions. And we see the motorway networks as the spine of the delivery model across the market. And particularly, I think it's -- East Midlands and Yorkshire, really constrained supply. Less than 3% occupancy -- I think it's 2.7%, don't quote me on that, in the Northwest. So really constrained markets. So that plays well to the geographies of where we've invested as a warehouse portfolio. Do you want to add anything?

No, I think just to finish off the first part of the question, yes, we believe there's potential. We've beaten the ERV growth that we've already seen. We've seen 2.5% ERV growth in this period alone in the 6 months. And also, we've invested GBP 3.3 million worth of capital expenditure into the assets that we've got. And on top of that, we've got 2.5% under refurbishment at the moment. And all that refurbishment assets come out of the like-for-like. So yes, we do think we're poised for continued growth.

Julian Livingston with RBC. Just coming back to the acquisitions then and based on what you said, it sounds like we should expect things -- a similar sort of yield as we've seen on the recent acquisitions. And then related to that, focused on that arc, Oxford-Cambridge, what is the advantage you have there in terms of making the acquisitions do you think?

So the acquisitions, as Paul referenced, had a blended yield of 6 -- 4.6% in the period. And obviously, that's a function of where pricing is in the market today. And I said earlier on, we are tasking ourselves with buying quality and not chasing yield in tertiary locations. So yes, you're right in the sense that we are prepared to pay these prices, but the proviso is that we're looking for 10% total return for many acquisitions. So the point about the geography of Oxford-Cambridge is that you've got a disproportionate amount of economic drivers and a really constrained supply around the Cambridge asset, for example, lots of science parks, precious little industrial space. So we think the rents will materially outperform wider regional markets.

It's Matt Saperia from Peel Hunt. A quick question on Radway Green, if I may. With the latest planning application, that's looking like a very exciting scheme delivering 1.8 million square feet plus potentially. We've seen today, private equity paying what looks like a very rich price for a land parcel where they're going to build big box. You can start next year, I think, the first phases of that. How are you thinking about the delivery of the product? And how are you thinking about funding that?

So our -- you're absolutely right, we are seeing upward pressure on land values. A, there's a shortage of it; and it's a reflection of the yield compression which feeds directly through to rising land values. And GBP 1 million an acre seem to be a scarce commodity 5 years ago. It seems to be talked about in regional markets every 5 days now. So our default assumption is that we obtain planning permission. We secure pre-lets on a phased basis, and we build to hold. So what we -- on a phased basis, we think we have the resources to implement the scheme. And we're assuming that implementation will be over a 3 to 5-year period. So we should see the material benefit coming through to existing shareholders. Again, thinking about -- our objective is to secure 200 bps of running yield over and above the market price. And again, thinking about gross development value, 200-plus million for the scheme. Rents in Crewe will be around GBP 6.25 per square foot. I think that was the last deal, and -- of buildings of this sort of scale. So it hopefully gives you enough for the numbers. Any other questions in the room?

The model that you have at the moment has, as I understand it, been fairly strongly based on the fact that buying secondhand remains cheaper than actually developing new warehouse space. But the way things are going, that's not going to last forever. And then your business model would have to change, I imagine. I'm just wondering whether you have a sense or a best guess of how long it's going to take before that radical change happens.