Earnings Call: H1 2018

Aug 24, 2018

Hello, and welcome to today's Kingspan 2018 interim results. Throughout this, all participants will be So today, I am pleased to present Jean Mercer, Chief Executive Officer and Jeff Derity, Chief Financial Officer. Jean, please begin. Thanks you, and good morning, everybody. And just before we go into the, the results of the page, we'd like to just refresh people on what our strategy is as an organization. So if you've got the presentation in front of you, you might move to slide number 4. It's it's we've set this out for a long time now, but in essence, our aim is to be the world leader in high performance insulation and building Albert Ups. And we aim to achieve that by having the most innovative products possible. And by innovative, we mean particularly around thermal and fire performance and no compromise on either of those fronts. And we aim to achieve our growth by penetrating markets, both in Europe and way beyond, where uses of high performance insulation materials are be low levels and some countries not even use at all. Globalizing our business has been a strategy. We've been I'd say significantly focused on for the last 8 or 10 years. At this stage, there's about close to 20% of our business now is UK source. If you look back 10 years ago, that was probably in excess of 70%. So we've been on a path to making our business much more evenly spread worldwide and we're going to continue. And if anything ramp up that dimension of our business over the coming years. And all the while, and we'll deal with definitely more debt later, internally, we want to achieve this by having a net 0 operating environment. And by that, we mean that we will either use or consume only when you will be generated power and driver organization. And on slide number 5, and 6. This really deals with the essence of our product portfolio. We would be, I guess, the only full spectrum provider of Materials effectively covering almost all forms of insulation, both in terms of core insulation board and the insulated panel offering. So right the way through from traditional styrene and fibers, fibers, in this case, being used as a corner insulated panel rather than an insulation board. And then all the way through the more advanced insulation materials, all the way up to our more recent product introductions, like quad core up to more, and seem to be launched, what we call, next generation core, brand, brand to be confirmed. This product, we aim to be launched in 2020. It could be fiber free relatively lowlander by comparison to traditional alternatives and will achieve a class a fire performance. And on Slide number 6, again, this is something we've demonstrated. It focuses particularly around the term of performance of our products. And in essence, you can see that the majority of what we offer between PII or quark co occloon term, would be up to almost twice as efficient. As traditional alternatives. And this becomes more and more critical as demand for installation increases and space obviously becomes more an area of focus And as I've said earlier, we want to achieve all of this without the compromise in terms of whole system fire performance. That's been a crucial area for us over many years and we welcome that increased focus worldwide On slide number 7, completing the envelope, we obviously are the world leader in rigid board, world leader in insulated panels. And that's something that's definitely, as I said, needs to continue in a wider geographical spread. But beyond that, we've embarked on the strategy to become a world leader in what we term light and air. So this is year on daylighting, ventilation of smoke management and buildings, obviously, through the ventilation process. So that's a business we've been sending over the last few years. It's going to achieve revenue in excess of 1,000,000 this year. And as we've outlined before, we have we have near term near term eyes on around CHF 500,000,000 of a globalized business there. Industrial installation, we still remain embryonic in, as we the case with flat roof membrane, both of which offer significant avenue for high performance insulation materials. We see these as both from an organic and an acquisition platform perspective, and very suitable areas for us to grow longer term as well. So plenty of scope for organization, both in terms of the existing products and sectors, and the ones that we've yet to really make a mark on. And on Slide 8, then, the plan that's important to us and our commitment to us has been, has been clear for the last 7 or 8 years. As I said, we want to operate a net 0 organization, which has not been easy to achieve, and I guess a lot of our peers will be even more difficult to achieve. But we we said about trying to, find a target of 2020 net sales position. And as of this year, by the end of 2018, we expect to be comfortably in excess of 70%. And that includes the impact having to obviously deal with and absorb acquisitions as well. Once we achieve that 100% level, it's we're going to maintain that clearly as we grow and expand and acquire. Etcetera. In terms of recycling, obviously a critical issue going forward. We live in a world of classic whether we like it or not. As a business, we see significant advantage in being able to recycle a pet based, buckles, and at present, we're using over a quarter of a 1,000,000,000 of those products in our in our solutions. And it's our ambition to at least double that and 500,000,000 units in 5 years' time. So that's critical. And these materials effectively get recycled into the highest performing insulation materials that you can find. So that's a significant commitment to buyers going forward. I'll jump to Slide 10 now, which gives us a snapshot of the past 20 odd years or so. And obviously, that's been it's been the product of the strategy we've been committed to. And so revenue growth and compound is in excess of 17% and even consensus this year of around CHF 4,200,000,000 as an expectation. That just kind of was a snapshot of what we're about where we're going, where we've come from. And I'll jump now to the issue of the day, which is the results for the first half, and that's on Slide number 13. And so I'd add top line revenue of 15 percent to just over $2,000,000,000, which is a first time for us in the 1st 6 months of the year. Trading profit of 10% and basic EPS of 8% to almost $0.81. So insulated panels, having a sluggish start as was the case with insulation boards grew by 14%. And Jeff will go through the detail of what's underlying mix acquisition, etcetera. And critically important has been the growth of the quad core technology, which is up 76% and now represents 6% of our global incentive panels. And that figure incidentally is 18% for the UK and Ireland which is the area where we started off in. And that 18% for these markets, we would expect to exceed 25% by the close of this year. So making very significant progress there on a technology that is really groundbreaking when it comes to a terminal and indeed fire performance. Our board business up 15%. Obviously, there was a significant impact of inflationary cost recovery from MDI over course of last year, which carried forward into this year, and cool term, obviously a critical product stream for us, growth of 12% and that now represents 35% of global insulation and 37% in fact if you strip out the effect of acquisitions in the period. So great progress on that front. The Life And Air Business, as I outlined, is on track to achieve CHF 300,000,000, up 11% like for like and significantly more clearly when we add on the impact of acquisitions. And margins in that area also improving, we'd expect to exit the year to trading margin of around 8 percent, which is very 2nd half loaded. It's just the nature of the business is the 2nd half based, and we'd expect to have very strong period ahead of us. Water And Energy used to be environmental. We'll be focusing clearly on those two segments going forward. Broadly in line with prior year after like EBITDA or else a slow enough start. And access flow is predictably the 7% behind as office construction impacts us in the U. S. And also we anticipate continued slowdown in the UK. Which quite aside from any, any, Brexit, material is something that we would have cyclically felt was going to impact us in any event around this year and next year. Then significantly from the development perspective, We've made a significant step into Southern Europe with the acquisition of Cintasia, something that's been going exceptionally well in the 1st 6 months of ownership. And indeed, we've entered India through the establishment of Kingstone Jindal. And this is a business now that's got 2 manufacturing locations in India. We would expect to add a target over the course of the next 12 to 18 months. And obviously, it's at a critical point in terms of This market is really embryonic and the consumption of high performance insulation materials like Latin America just isn't even on the register by comparison to more developed markets. So we see very exciting long term prospects for our businesses in these regions. On Slide 14, I'll hand you over to Geoff now to deal with the financial highlights. Thanks, Jean. I know on Page 14, and just at the outset, we make some reference to constant currency measures in the statement. The 2 principle currency movements in the period were euro sterling and eurodollar. So our average sterling rate was 0.86 in H1 17 compared to 0.88 in H1 'eighteen and the U. S. Dollar was 1.081st half last year and 1.21 first half this year. So they're the principal drivers of the, of the currency changes. Beyond that, as Gino's on group revenues, and took ahead of 1,000,000,000 in the first half of the year, ahead by 16%. And I'll come to the constituents of that in a second. Trading profit of $195,300,000 head by 10 percent EBITDA at $231,600,000 and by 11% And that translated down to earnings per share growth of 8% with an absolute EPS in the first half of $0.80.7. The interim dividend is up by 0 point 0 $1 or 9 percent to 12% per share. Our free cash flow, and I'll break this out in a second, that was $38,400,000, drawn in line with free cash generation in the first half of twenty seventeen. Our net debt was about 300,000,000 higher than the first half of last year with development activity and acquisitions being a key team in that regard. Our trading margin down by 50 basis points, half year on half year. And I'll break that out by division in a few moments. Our leverage, our net debt to EBITDA, at the end of June 1.59 times, our return on capital employed 15.6 percent, but the truer measure would be after the annualized impact of acquisitions, which implies return on capital employed of 16.6 percent. Turning to page 15, to look at the divisional margin performance, insulated panels in the first instance had a margin of 9.7 percent and down about 30 basis points on last year's full year margin. Essentially 2 drivers of that the first being the relative mix of markets in the periods, but also the initially dilutive impact of some of the acquisitions made in the initial phases. Our installation boards division recorded a margin of 12.4%, so very strong. And the key team there was the relative mix of cool term, cool term volumes were very positive during the first half of the year. And that had an impact on the margin mix within the division. Lisenair is very much a second half weighted business its trading margin of 4% broadly in line with the first half of last year. And as Jean has done, it's trending at about 8% for the full year. Water and energy at 5.7%. Again, has a more significant second half would have had a soft Q1 due to the prolonged winter, but it's trailing to plant raised access floors at 10.3%. Again, it's really a reflection of the market mix and we would expect for the full year, the trading margin in that division to be under around 11%. So the mix of all of those, combined to give a group margin of 9.7% for the half year. And we would expect, at this point, for full year, the margins to be up around 10% at group wide. Page 16 deals with the group sales and profit bridges. So to deal with sales in the first instance, And the relative conversion of exchange rates year on year, chips 4% off sales, so minus $70,000,000. Acquisitions contributed to 15% or $257,000,000 in a half year period. And underlying sales grew by 4%. And if you look at the quarter on quarter performances, Q1 underlying sales were head by 1% Q2, as we indicated in our trading statements in April, Q2 was busier, so Q2 sales were hit by 7%. On the right hand side of the page, dealing with trading profit, The currency impact was a negative of 6,000,000. Acquisitions contributed 21,000,000 in the first half and under bank profitability ahead by GBP 2,500,000. Free cash flow is set out on Page 17. Naturally biggest driver of free cash flow was the EBITDA of $231,000,000 in the first half. Seasonally, working capital in June is higher than it is in December. So we had an outflow of $92,000,000 in the first half of the year. That compares to an outflow of $81,000,000 in the first half of twenty seventeen. Our working capital sales ratio is slightly higher than normal at 13.8%. And we expect that to be up the order of 12.8% for full year. So as we go through the second half of the year, and approximately half of that $92,000,000 will reverse in the second half of the year. Other movements in terms of free cash generation, our interest bill, 7,000,000 taxation payments of $30,800,000 and net capital expenditure of $68,100,000 combining to give free cash generation of $38,400,000 in the period. Page 18 reconciled net debt to the open position. Acquisitions were the key cash flow items in the period So cash out the door was $235,000,000, but also in the second one acquisition, there's a deferral payment of $13,000,000, which was accounted for debt which will be set in April of next year. And the dividend outflow was 46,700,000 net debt at the end of the year, $739,000,000, which gives leverage of one 0.59 times as I summarized earlier. Turning to page 19 and return on capital employed, still that is a high level of 16.6 percent when you annualize for the impact of acquisitions. And naturally, we'd be seeking to build that over time with our long term targets, being up the order of 20%. The strength of our balance sheet is set out on page 20. At the end of the half year, our total available cash balances and committed undrawn facilities, $671,000,000. We referenced late last year that we agreed to file a license of GBP 175,000,000. That was drawn in January 2018. And our principle syndicated bank facility is a million facility, which was substantially undrawn at the end of the period. On with an additional $50,000,000 bilateral facility, which we come down in February of this year. So when you add up the some of our debt facilities, the weighted average maturity of our debt is 5.8 years. And the geography and the split of it, is set out on page 21 compared to H1 'eighteen to H1 'seventeen. And the movement of note would be in Britain and Northern Ireland, which was 26%. In, first half of twenty seventeen and, was 23% in first half of twenty eighteen, mainly in Nigeria, 47% as opposed to 43% a year ago and with the completion of the BALEX acquisition shortly after the period ends, that may mean that European dimension of our business will be in excess of 50% on a run rate basis. The Americas, but broadly similar year on year of 19% as is the case of West Forest. So that is a summary of the key financials. And with that, I'll hand you back to Gina. Thanks, Jeff. Don't propose controlling all the detail of the divisional slides, which, which, no doubt, the audience will have retro, but we would like to deal with the outlook, which is on Slide number 28. And I think it's kind of hard to make out that number 28, but that's a titled outlook And in essence, the momentum that we saw in quarter 2 has continued largely through the 1st couple of months of quarter 3. In particular, we'd highlight that Germany, France, North America, Latin America are all areas that are are tracking comfortably ahead of prior year. And the UK, clearly, we would expect for obvious reasons to ease back But the order book presently stands at around 6% ahead of the same period prior year. Which despite all that's going on is a reasonably strong showing. And so with the combination of all of that, I think we should be well able to deal with any anticipated reduction in activity in the UK. But what we have found in that market incidentally is that There's a lot of Brexit agnostic projects that continue to perform well and in particular highlight areas such as the online retail infrastructure, which irrespective of in or out or what version of out takes place. These kind of projects are continuing unabated. So that's been a very supportive end sector for our business. But with regard to what I term our regular business, or normal activity in the industrial market in the UK. Clearly, there have been push outs and postponements and all sorts, which is not surprising. So like anybody else, we look forward to an outcome, whatever the outcome is over the next 6 months, and we can then take whatever the appropriate actions are to deal with that. And so in essence, we would expect to finish the year in reasonable shape. I'm comfortably ahead of last year. And so happy now to hand over to to the Q and Could you please press 0 and then one on your phone keypad now in order to enter the queue? And then after I announce you, Just ask that question. And if you find that question has been answered for its return to speak, just press 0 and then 2 for Okay. Our first question is over the line of Donohue at Davy. Please go ahead. Your line is now open. Okay, Flora. You may be on mute. If you could take your phone off mute, that would be most kind. Sorry. Can you hear me? Yes, Claude. Great. Thanks, Jean. Just a couple from me. 1, just on the UK going back to the UK there. Just looking for a little bit more color maybe by the product categories. You mentioned, obviously, panels. Just wondering now what the what the business mix there looks like. On the board side, just wondering how much of it has been driven by price in terms of your growth and where that kind of leaves you in terms of market share dynamics And also just a word on active flows in the UK, I think from the state, it looks like your language there has become a bit more constructive Second question then, I guess, this is probably more for Jeff. Just would appreciate it, Jeff, if you could give us maybe a little bit more of a steer on the full year contribution from the acquisitions or the H2 contribution from acquisitions with with with Alex on board. I'm just wondering given, you know, if you if you're looking through the numbers, it looks like the marginal acquisitions in H1 was just over 8%. Is that the kind of number we should be thinking about in this for the year overall or does it progress a little bit in the second half? That's fine, Troy. So just dealing with your, yeah, you get panels, got off to a poor start. Had a strong recovery of around 6% in, unit intake in the 2nd quarter. As I said, the order bank is is around that that much, if not slightly more than that, ahead of the same period prior year. And actually our project pipeline, mainly around larger projects as say, not the regular business medium and small size is actually quite, is quite attractive for the remainder of the year. On the board business, you rightly point out that there has been obviously significant inflation, particularly around the PIR board. Which was all MDI related to last year. And that's, that's a broad subject because, the the unit sales for our board business are actually down in the UK around that CoolThermo PR down. And it's down for a couple of reasons. 1, the overall sector will have lost share due to the lack of competitiveness. I think we'd have highlighted that ad nauseam 6 probably even 12 months ago. And so and as a company, I think we've probably taken an even harder stance than most of the industry. And as a result, perhaps giving up some share and to other PIR players in the process. Now that's clearly that's clearly a tactic and that's something we can we can address whenever we feel it's appropriate. But for the time being, that is what's, what's keeping unit sales in the UK subdued PIR and its price. Now I should add that MDI has been unwinding. Again, as we would have highlighted, 6 months ago. So I'd say significant deflation on that material. We've probably been slower to give that up as you might expect. And as a result, we'll have lost some share. Overall, I'd say as a sector, because of the severity of the increases that product is seeing, not just in the UK, but in the wider area in Europe, the sector would have given up share to some traditional products like polystyrene and even forms of mineral fiber. So I think it would be interesting to see how that all pans out as PIR and becomes more lean and competitive as it would have been 12 or 18 months ago. So that's all I got to play out, let's say, over the next 6 or 9 months. From an access flows perspective, obviously there's some potential Brexit impact, as you'd expect, banks aren't exactly running to construct large offices in the UK presently. But quite aside from that, we would have expected a cyclical downturn here anywhere around time, and that's, that's transparent to be the case. So the focus for the team is obviously just to consolidate the acquisition, but to shift our emphasis towards mainland Europe. Which traditionally for us hasn't been, a great outlet for access floors, but we now have manufacturing presence in better than And we'd be expecting the team to compensate for any UK down turnover in those markets. And then on the margins, Just on your question regarding the contribution from acquisitions, in the second half of the year, we would expect sales from the acquired businesses beyond the order of $350,000,000. So in other words, the total acquisition impact this year of the order of $600,000,000 for the total year. The trading margin would be somewhere in the range of 7% to 8% targets to be specific on that because it will depend on the mix of activity, but that's the shape of it. And naturally over time, we'll be seeking to developed that book for this year, that's the general shape of it. Hi, Geoff. Jean, just to go back to your comps and boards, what you're saying about the PIR. I take it that's what you referred to in the statement. Read Benelux, that's exactly the situation there of what's happened. Absolutely. If anything, Flora, it's more pronounced there. Okay. We're now open for line of Andy Murphy at Bank of America Merrill Lynch. Please go ahead. Your line is now open. Is he gone dead? No, Andy. Can I help you? I'm sorry. I had 3 questions, I suppose, 2 of them are related. First of all, on the Indian JV, can you just give us a bit of color around that, what you're what you're investing in, what the returns you're expecting. So just a bit more sort of a flavor for what you're doing and what the opportunity is. And secondly, on the sort of energy efficiency side, could you just talk about what you actually mean by 0 energy? I think you've before, and I'm I'm I'm just just don't know what it means. So I'm wondering if you could flash that out. And then I just think you're very interested in your ocean harvesting ideas for the plastic bottles. Can you just talk about where the bottles come from at, whether they're sourced, the whole process around what characteristics these bottles have that allow you to use them? Okay. Just in terms of the India question, the expected sales for the business there this year will be approximately 1,000,000. And that's, that's our state of 2 facilities, one very recent one in Central India and your indoor and the other in Northern India, which has been in place around 10 years. And so we would expect over the course of next year to pretty much fully utilize that capacity and invest in a third facility more than likely in Southern India with our partners there. So the consumption of instated panels, for starters, not to mention installation is really microscopic by comparison to any other markets that we've been present in. So we kind of see it has a very early stage positioning of our business and our brand there. In terms of 0 energy, what we mean by that is that that all the energy consumed within KingSpan will either be manufactured on our sites or procured from renewable sources. And there's only so much that we can actually produce on-site for obvious reasons, restrictions in terms of wind, etcetera. And so that's effectively what we mean. So fully certified consumption of only renewable power for our entire manufacturing infrastructure worldwide. And in terms of the pet bottle area, Again, it's, you know, fully committed to, as I said, whether we like to run off, we're surrounded by plastic and will be for many years ahead, even though will be attempts to reduce that. And harvesting of the ocean aspect, I think, is at very early stages. But we will be committing significant investment towards that whole initiative and bringing the product back into Spain where we produce polyols, which will then go into insulation materials. And when we set a target there of 500,000,000, to be on the switch, that could be multiples of that if this goes the right direction. And believe it or not, from a performance perspective, it's actually a preferred material for us to consume in our PIO installation. Okay. The next question in the queue is over to the line of Robert Eisen at Goodbody. Please go ahead. Your line is now open. Just two broad areas of questioning. Firstly, just on M And A activity, obviously, we've come off the back of a very busy period in terms of acquisitions. So just really wondering, you know, what is the appetite for acquisitions over the next kind of 12 to 18 months, what areas should we expect such activity to be in? And what is the multiple environment and like in terms of executing those deals? I'm just in relation to that, you know, in your summary of your, kind of, of the strategy of Kingspan, you highlighted the membrane market and also the industrial market when should we expect to see progress in those two seconds like we have seen in kind of light and air? So that's kind of my broad question around M and A. Generally. The second area is just around price cost spreads. Can you just give us an indication of the extent to which you faced input cost inflation in the first half. And you've already alluded to MDI's coming off a bit. So maybe just elaborate on that a bit in terms of the extent of tailwinds that is bringing KingSpan at the moment. Okay, Robert. You're right to say been lots of M and A activity over recent months and even years. And as a result, I think we obviously be taking a little easier for the second half of this year as we bed down these businesses. The Spanish business and the South American business in particular, settled in exceptionally well and quite quickly. And we're very early days into the Bialix business in Poland. And I fully expect that that'll be as smooth as the others have. It's obviously a product area and a manufacturing process and a market that we've been in for many years. And are very comfortable with. And our appetite remains clearly, but that's, that's to a large extent, governed by our timing and our ability to digest also from a financial commitment perspective. So we have an internal comfort level of around 2 times debt to EBITDA, which you can do the numbers on yourself there. It still leaves us with some headroom before we would get there. The multiples that are being paid and are certainly not contracting. That would be our experience. So it's certainly for high profile, attractive businesses, the multiples, EBITDA Multiples are higher than you'd like. But at the same time, we're still able to acquire probably a smaller businesses that's in the overall blend make our returns satisfactory. North America, I'd say, will be of significance and scale. Let's say North America is an area. That said we want to we want to make more progress in. Our panels business is obviously well established. Our boards business less so. And that that's an area that we want to have more of an impact in. And so if you like, yes, that's an area that will get more significant focus. From membrane and industrial, rather, this will be around having the right entry point. You know, what we don't want to do is something, insignificant. It's it's gotta be off scale, at least pan region, if not global, and we're just going to be patient in terms of when and when that actually happens. And but you can take it there very firmly part of our strategy. And the same way as we're executing on light and air that will happen in time in these two product segments as well. Just on input and inflation, inflation wasn't a particularly notable team in the first half of the year. If we look at the 2 key components of our cost of goods, steel and chemicals, steel with the tariffs in the U. S. There is an amount of inflation in the U. S. On steel, but there is some modest relief elsewhere. So broadly, as it relates to steel, pretty stable environment overall across the business. As we move into the second half of the year, the likelihood is that NCI prices will soften all course of the second half of the year. For the whole inflation, the agenda that we were grappling with this time last year, we're meeting with an entirely different environment now. Okay. Thank you. Okay. We now go to the line of Emily Bedoff at JPMorgan. Please go ahead. Your line is open. Questions, please. The first one is just on Slide 31. I outlined sort of the organic expansion. Can you remind us what the approximate revenue contribution from those is over the next couple of years in total or sort of however we should think about it? And then secondly, just you obviously talked about continuing to see some cost inflation in the U. S. And that being sort of the one place where you are still seeing it there anything sort of different about that market that sort of impacts your ability to pass it through? Are you confident that you can continue to do that and not impact the sort of penetration growth story there? Thanks. Okay. I mean, in Slide 31, in both terms, it would be around $300,000,000 of revenue related all of the initiatives on that on that slide when we get to kind of a respectable level of utilization. Some of them already have been done. Others are still still greenfields. And but that's it in essence. And obviously as we go through this, that, that slide will get populated by by other initiatives that we expect to be putting in place. In terms of the U. S. Inflation, it's very much tariff link and steel link. And it's, it's a, it's a reasonably chaotic environment, actually, when it comes to that. Look, we've, for example, in Canada, we'll be buying U. S. Sourced steel putting the tariff on it to bring it to Canada, reduce the product and then try and recover the tariffs as we send that product back out again into the U. S. We're forcing it out of steel from Asia into that market. Obviously, a number of those markets are subject to tariffs. But all in all, it's led to a lot of confusion. And at the end of the day, it's led to cost inflation. So I'm not I'm not really benefiting from this. From an administrative perspective, it's a bit of a headache, and obviously from a cost perspective, it drives inflation. Now in terms of the sensitivity of that, around conversion. A lot of our conversion has been from built up metal systems. So that would be steel, fiberglass, and another layer of steel, etcetera. So from a cost component perspective, if anything, those systems are more metal dependent than the insulated panel is. So it doesn't affect, our ability to penetrate on that front. And contrary to that though when you look at walls, a lot of the walls we're trying to convert from in North America are concrete based. And so it does put us at a disadvantage when it comes to that from a cost perspective. But when all said and done, unless these tariffs go completely ballistic. I think our conversion strategy will still be very much on track. Okay. We now go to Gregkuglitsch at UBS. Please go ahead. Your line is now open. Hello. Can you hear me? Yes, we can. Please go ahead. Thanks. I've got a few questions. So the first one is on margins. I guess, 2 dimensions to the question. One is, where do you obviously, you've done lots of deals, things have changed around in the mix? But what's your view now where you think margins, I guess, as the business stands today, should be heading towards? And then The follow-up question to that is, obviously, last year, you pretty much passed on all of the input costs. Now you're seeing the reverse what's actually a good environment for you? Is it deflationary environment good for you or do you think actually it doesn't necessarily help because obviously if you have wild swings and then you have to sort of adjust the product pricing. And then the second question is, do you think you made you made a point on your fire safety side. Obviously, it's been one of your peers. It's been quite vocal about taking share, on, on, due to that. So I want to get your view what you're seeing in terms of relative mark share or whether you think it's more a geographic point rather than anything else. I just want to understand how you're positioned there. Okay. I'll deal with that question first in any event, Gregory. I actually didn't hear your first one because there was an alarm going off here. But, yeah, in terms of Fire Safety, we've we've we've heard we've we've heard, we've obviously heard what some of those characters have been saying and I'll come to the substance of that shortly. But the litmus test for us really is from an insulated panel perspective, first of all, it's we're the world leader in panels, which is quite clear. And that covers all cores of materials that are used in inside the panels. Including fiber core. So around including the acquisitions we've done on a like for like basis, Mineral Fiber is a core is 11% to 12% of our square meter consumption worldwide. And that's been pretty consistent as a figure. And by consistent, I mean, fairly exact, it's not even slightly down, year on year over the last 3, 4, 5 years. So just out of pure measure, that's when you take all of the excitement out of it. That's one area that's just indisputable. From a rigid board perspective, we would acknowledge all day long because there are certain applications in high rise residential where there will be some slippage towards higher fire performing solutions. And that that's larger around high rise residential in UK for obvious reasons. Now for us as a business, that's a represents around 1% of our revenue. So as we said all that, there's a lot of confusion out there. And I'm not going to get into a technical fire discussion here, but suffice it to say that the language of combustibility is very much and the assumption that something that's combustible is safe is not safe and something that's non combustible is safe is very flawed. So we really defer to large scale fire testing of materials irrespective of what the inputs are combustible or non. I think there's nothing compensate us really for that large scale test. And over time, and the science of that ultimately is what's going to prevail. But in the near term, I'd accept that there is a vacuum in that segment of the market and there's a shift across to that material. And let's see how that evolves. And all I can tell you is that KingSpan will find a solution for that application. Might take a silly time, but any square meter we lose rest assured we regain it at some point in the future. Thank you. So repeat the first question. So you got cut off by the fire alarm. So it's on margins. So the question is, was twofold. 1, what do you think with the current shape of business? Obviously, bottom a number of businesses that are a bit different to historic business. So what do you think margins are or should be for the group as it stands today? Obviously, we can't predict future transactions, which may impact that in due course? And then the second question to that is, do you think deflation on commodities is good or bad news for KingSpan. Obviously, last year, you managed to pass on most of the input costs quite successfully. Do you think now that perhaps, well, some products such as MDI are going down, whether that will be a net benefit to your earnings or not? And if you're to take if you're dealing with your second one, if you're to take a very short term view, probably a benefit because we're clearly, we'll be more reluctant to pass it on at the pace we would get it, which was the case on the way up as well. And of course, all in all, when you set aside the kind of quarter on quarter ups and downs or whatever, the more competitive can be more beneficial. It's going to be long term. And so deflation ultimately when you take a long term view, enhances our ability to convert. So that's that's our preferred position. Just on your question as it relates to margin, Gregor, overall, in the first half, the portfolio was at 9.7%. All things were equal. For full year, we'd be at or around 10%. And that is our medium term margin guidance. When you take account of the mix of businesses that we have, the mix of markets that we have, acquired businesses that are an issue is alluded, adding all of that up in a broad sense, implies approximately 10%. Okay. Thanks a lot. Any further questions? Yes. Our next question is over the line of Eve Chourmet at Exane BNP Paribas. Please go ahead. Your line is now open. Good morning. Can you hear me? Yes, we did. Yes. Great. Thank you much. So yes, just a few questions on my side. Just looking at slide number 7, where you show the KingSpan solution in competing the building envelope, are there any products that are not shown in that slide that you could also get into complete the overall building envelope and get a strategic fit, in time. Then my other question, is on the change in the name of the environmental division. Is that purely for commercial purposes or should we read something else in this such as a potential divestment opportunity in time? And then one of my last question would be on your raw material bill. Could you maybe give us a sense of what is the share of polyole in terms of that raw material bill? Thank you very much. Okay. So completing the envelope, to be honest with you, there may be some other areas we'll get in the future, but I think we've quite a quite amazed as I just here in any event. And obviously, we're going to limit it to the energy sensitive part of the envelope. So But there are all kinds of things in the building that have no influence one way or another on the energy farms of the building, and that's not of any interest to us. At the core of what we're about is that consolidation agenda. And I think dealing with the aspects we've highlighted gives us more than enough scope for growth. In terms of the water and energy, there's nothing to read into that, except that's going to be the focus of this business rather than it being a platform for divestment. And so we've probably been improvement over many years, probably less disciplined than we might maybe should have been in terms of product segments we get into. So it's really focusing on storage and water treatment. And that's really what that's about rather than any kind of a commercial or marketing agenda. And then from a chemical perspective, our consumption of polyols would be approximately 1,000,000, from a cost base perspective. Okay, thank you. And if I could just have a follow-up on the installation board division. Am I right in understanding that actually the pricemix sequentially higher in H1 'eighteen versus H2 'seventeen? Yes, I mean, the underlying sales growth in boards in the first half of 7%, and, in terms of the outlines that the price dimension was plus 10% with some softness in volume. Okay. So that's up quarter H1 'eighteen versus H2 'seventeen, yes? That's page 1, 2018, the underlying sales growth in Insulation Board. But can you maybe give us a sense of whether or not the price increases it was sequentially higher in the first half of twenty eighteen versus second half of twenty seventeen? The price, we would have had some run rate benefits coming into H1 'eighteen price that were implemented in the second half of last year. So there would have been more absolute price increases delivered in the second half of last year. Naturally, we had a real big impact then in the first half of the year. Which is more pronounced versus the first half of the year. All right. Great. Thank you very much. Okay. Before we go on to the next question, which is from lush Mahindraja of Berenberg. So, lush, please go ahead. Your line is now open. Good morning. Can you hear me? Yes. Hi there. I've got two questions, if I may. If the first sort of follow-up on on the last one, actually, just in terms of that, that pricing run rate, am am I right in assuming in H1 that was a 6% impact And then should we expect sort of nothing in into H2 to giving given price deflation, in MDI and and to fund that as well, could you give a quick reminder of the still and NDI, sort of cost bill for 2017. And then secondly, I see quad core quad core is growing, as a share of your products and panels. Does that have the same, positive impact on your margins? That's what's confirmed, not rewards, or or is that that have less of a benefit? Thank you. Okay. Okay. We'll deal with that as best as we can. Pricing in the second half won't see any inflation. And far potentially some applications in North America, which will be seed linked. But on the whole as a group, there's potentially deflation in the second half, particularly around the board business. And in terms of quad core, quad core is clearly designed around differentiation and designed around, 1st of all, margin protection and indeed enhancements. So yes, that will be a key driver of our margin profile into the future. And we also expect to launch a quad core installation board for flat roofing applications and probably towards the end of this year. And to differentiate that business in the Flat Roofing segment as well. Well, Steve, sorry, you asked about receiving NGI bills. Yes. So on the 2 key 1,000,000,000 annually now and our chemical bill across the business is approximately 1,000,000. Okay. Thank you. Do you have any other further questions? No, that's fine. Thank you. Okay. Well, if that was the final question for today's call. Sir, gentlemen, can I please pass it back to you for any closing comments at this stage? That's it. And thank you, Hugh, for your support there. And, everybody else, thanks for joining the call and we'll be in touch over the coming days. Okay. Well, this now concludes today's call. So thank you all very much for attending, and you can now disconnect your lines.