Earnings Call: H2 2019

Mar 11, 2020

morning, everybody. Thank you for coming today. I'll hit some highlights for the year here, and then Rob will take you through some of the financials, and then I'll follow-up with some dialogue on the business overall. I think it's fair to say an excellent performance in challenging conditions for Breen in 2019. I think the numbers speak for themselves. But if they don't, I'll reiterate it. Again, we consider that to be an excellent result for the year. We improved results in all three divisions, that's GB, Ireland and Cement, and continued tremendous cash flow. The integration of LAGEN was largely completed and the part that isn't completed was our decision to delay some of it based on some other priorities we had in the business. And we were pleased that some on the acquisition side, there were still some smaller transactions done. We acquired Roadway in North Wales, so we finally got the plant in Wrexham that we've been talking about for 6 years. And we're delighted to be involved in a joint venture with Capital Concrete in London to give us access to the London market in some critical mass. We spent a lot of time during the year and ultimately agreed on acquisition for a portfolio of assets from CEMEX in the U. K. I'll talk a little more detail on that as we go forward. And as we grow and mature as a business, the next two points, I think, reasonable job at it, but we never quite told that story. So we have made a commitment to the GCCA's sustainability charter, and then we're delighted to announce our current attention to declare our maiden dividend with our 2021 interims. So all in all, a very good year. Good morning, everyone. As you can see from the financial highlights, we have once again reported an improved performance. We've delivered revenue growth of 8%, underlying EBIT growth of 13% and achieved an underlying EBIT margin of 12.5%. Excluding the impact of acquisitions and disposals, revenue was up 1% and underlying EBIT improved by 10%. And this reflected an excellent performance in challenging market conditions, selling price improvements, a generally more benign input cost environment and ongoing self help. Profit before tax was up 18%, and on an underlying basis, it was up 12%. This all translated into an underlying basic EPS growth of 8%. These results incorporate the adoption of IFRS 16 in respect of leases. But as reported at the half year, the impact of this on the income statement is not material. However, again, as reported at the half year, the impact on the balance sheet and specifically net debt is more material. At the year end, the closing net debt of €290,300,000 includes an IFRS 16 element of $43,600,000 and represents leverage of 1.6 times. Excluding the impact of IFRS 16, net debt was GBP 246,700,000 and leverage was 1.4 times compared to 2.6 times at the time of the Lagan acquisition in April 2018, only 20 months ago. This deleveraging clearly demonstrates complete transparency, in respect to IFRS 16, we have also prepared the financial highlights on a pre IFRS 16 basis. And as you can see, the only material impact is a yellow box in respect of net debt. Turning to the income statement and revenue, which at €929,600,000 was up 8%. Excluding the impact of acquisitions and disposals, it was up 1%. At the earnings level, underlying EBIT of £116,600,000 was up 13%. Again, excluding the impact of acquisitions and disposals, it was up 10% for the reasons already mentioned. The increased interest costs to £14,000,000 primarily reflects the adoption of IFRS 16. Non underlying items of £8,000,000 mainly comprised of acquisition costs, including some in respect of the CEMEX acquisition amortization costs and reorganization costs. The resulting profit before tax of GBP 94,600,000 was up 18% And the tax charge of £16,600,000 reflected a tax rate of just under 18%. The charge was lower than the UK standard rate of 19% due to the impact of profits generated in the Republic of Ireland where the standard rate is 12.5%. All this translated into an underlying basic earnings per share of 5.08p up 8% of 2018. Now turning to the segmental performance. And we are pleased to report that all 3 of our divisions produced an improved performance in 2019. However, the political uncertainty created by Brexit overshadowed all our markets during the year. In Ireland, in addition to Brexit, market conditions in the North were compounded by cement, the Irish market remained challenging throughout 2019, with all regions relatively muted apart from Dublin, which continued to grow strongly, whilst in GB market conditions were broadly stable. In Great Britain, revenue was up 1%, underlying EBIT was up £1,400,000 or 2%, and the underlying EBIT margin was 10.2%. In Ireland, revenue was up 29%, underlying EBIT was up £5,900,000 or 28%, and the underlying EBIT margin was 13.3%. In Cement, revenue was up 6%. Underlying EBIT was up £4,900,000 or 16%, and the underlying EBIT margin was 19.5%. As already mentioned, we improved our group underlying EBIT margin by 0.5 percentage points. We continue to target 15% in the medium term, but we do not believe that the pursuit of this target in isolation is in the interest of our shareholders. We have therefore introduced 2 additional KPIs, return on capital employed and free cash flow, which we believe will ensure better shareholder alignment going forward. Lastly, it's probably an appropriate time to comment on the status of the Lagan synergies. The integration of Lagan is now largely complete, and our current annual cost synergy run rate has hit the target of £5,000,000 Turning to our products. Reported aggregate volumes grew by 4%. On a like for like basis, there was a decrease of 3%. Reported asphalt volumes grew by 6%, and on a like for like basis, there was a decrease of 4%. Reported concrete volumes declined by 7%, but on a like for like basis, there was a decrease of 4%. And lastly, reported cement volumes grew 3%, and on a like for like basis, the decrease was 3%. Market declines of aggregate asphalt and concrete volumes were 2%, 1% and 4%, respectively. Over and above these market declines, our like for like aggregates and asphalt volumes were impacted by the phasing of major projects in Scotland and the shift towards higher value aggregates in England. In terms of pricing, progression in excess of inflation has generally been achieved during the year. And Pat will comment further shortly on the markets. Now turning to net debt, which stands at €290,300,000 at year end. Net debt has reduced by €20,400,000 from £310,700,000 at the end of 2018 to £290,300,000 and this movement reflected an underlying EBIT of GBP 180,200,000 a GBP 10,300,000 working capital outflow and which was £32,900,000 outflow at the half year interest and tax paid of a combined £30,300,000 a £55,800,000 CapEx outflow, which is net of disposal proceeds net acquisition spend of £15,900,000 and lastly, debt assumed on the adoption of IFRS 16 of 47,000,000 As a result, the closing leverage was 1.6 and as I said before, 1.4 times on a pre IFRS 16 basis. In addition to reporting on 2019 results today, we have also taken the opportunity to set out our capital allocation priorities. In summary, we prioritize the maintenance of a strong balance sheet and will deploy our capital responsibly, allowing us to commit significant organic investment to our business whilst continuing to pursue acquisitions to accelerate our strategic objectives. This conservative approach to financial management will enable us to continue pursuing capital growth for our shareholders whilst also supporting the dividend policy announced today. In summary, it's been a year of further improvement for the group, and we have built on our track record of delivering both organic and acquisitional growth. Breden is in excellent shape. And following the acquisition of CEMEX assets the CEMEX asset portfolio, our GB platform will be significantly strengthened. Whilst talking about the CEMEX acquisition, it is worth commenting on the 2020 market expectations. On a pre CEMEX basis, we understand that market consensus for underlying EBIT, CapEx and net debt is approximately €125,000,000 €62,000,000 217,000, respectively. We are comfortable with these numbers. In addition, we propose that investors continue to follow our guidance from January and assume completion of the CEMEX assets at the half year and that the impact on the 2020 results will be to increase revenue by €89,000,000 increase underlying EBIT by €5,000,000 and increase December 2020 net debt to approximately €400,000,000 We will provide a further update once the acquisition has completed. Lastly, we just wanted to flag that the UK government have indicated that the corporation tax reduction from 19% to 17% will be canceled in today's budget. The impact of this will be to increase our deferred tax liabilities at December 2019 by £5,000,000 It would also impact our future tax forecasts. I'll now pass you on to Pat to take you through his group and operational review. He will also give you an update on the status of the CEMEX acquisition as part of this. Thank you, Rob. This is the season for these results. So I know you're well aware of the construction output numbers. But I think key points for us here, infrastructure was still quite strong and that for us is a positive area. We benefited from improving selling prices and more benign input costs. So overall, we were able to demonstrate the margins moving forward. Delays today A9 have continued. We anticipated doing a substantial part of the A9 last year in H2, never really started. And to be honest, it hasn't really started this year, but that work's not going to go away. So I anticipate after a very wet February in Scotland that as we get into spring, we'll start to see activities rising on the A9, which suits us as well because it's a more efficient time to be for your productivity during spring summer than in the winter months. Pleasing for us, as you see, I talked about the Roadway acquisition for the asphalt plant, Wrexham, and then the joint venture with Capital Concrete. But aligned with that, we continue to invest organically to grow the business. We invest in new asphalt ready mix capacity in the business. So again, that parallel stream of organic and acquisition spend. And our priorities for 2020 in GB, we'll at least we'll aim to at least retain market share. We'll continue to improve prices and margins, and we'll continue to focus on organic improvement. Basically, it's a pretty story of self help. When a market doesn't help us, we've always been able to help ourselves, and I can see that continuing through 2020. Ireland was a bit of a different story. The ROI, very strong, strong activity, strides forward in that business. North of Ireland, relatively flat, somewhat impacted by no assembly at Stormont. And we're hoping now that that's come back in place, I think following the U. K. Budget, we might start to see some activity in the North of Ireland. So again, nothing drastic there, but the ROI business has continued on a pace that we're delighted with. We completed a couple of significant projects in Ireland, the New Ross Bypass and Dublin Airport. And we're continuing to expand the quarry network and the ROI. We discussed it last year and even when we did the Lagan acquisition about the dormant quarries, and we're continuing at pace to develop those quarries. And we'll see more internalization of aggregates in the ROI business as we self supply aggregates to the asphalt business. We completed the Colley Lane project in Somerset, and we were successful in winning some work in London with DP World. And we've got some major investment in North of Ireland and Temple Quarry. For 2020, we'll continue to exploit the demand, the strong growth for the lagging business. We continue to seek opportunities in GB for White Mountain and particularly aligned with areas where breeding are strong in materials and can satisfy self supply to those projects. And particularly in the South, we're pursueable on acquisitions. The pipeline is fairly healthy. We've now had the best part of a couple of years now where we've started to participate in the business and the ROI. The guys over there were very good at developing these relationships and identifying these opportunities. So I would anticipate some of those companies fruition in the near future, which will be a positive move for us in the ROI. That's Rob. Cement market, it's pretty stable in GB, but the Irish market was challenging outside Dublin. And obviously, there's areas outside of Dublin where we participate more. So there was challenges there. On the positive side, all three shutdowns for the kilns were carried out on time and carried out safely. And the performance of those two plants at Kindergarten Hope continue to be world class. I think for reference, the alternative fuel usage at Kinnegaard is 72%. And if we take Hope at 30 odd percent, then the average between the two plants is 43%, and I think that stands up well against most of our competition. But what it should be an indication of is when we get a plant in Ireland running at 72% in terms of fuel usage, you can see that we have that expertise and technical competence, and that bodes well for the future of hope. So our priorities for 2020. We'll continue to implement price increases. We've got several projects running at hope, particularly along the lines of supplementary raw materials and delivery systems, And that's really future proof in that business. And if we align that to the potential for alternative fuel improvement there, then I see the changes in carbon pricing. I see the potential headwinds of those input costs changing, and I can see it as a very compelling investment opportunity, which is a change from maybe 2 years ago. I'll now we discussed this one a few months ago, but I'll just remind you of the CEMEX opportunity. We are now in a process of the 2 pay process and some technology aspects of the transaction. And once we complete those, the deal will happen. So we still fully anticipate this deal to be complete in Q2. The CMA process is becoming a bit longer than we anticipated. I don't expect that the outcome will change. It may just take a bit longer. But I'll remind everybody here, the deal is not conditional on CMA, CMA review or CMA approval. This deal will complete in Q2. We have had very limited access to it because they're completely separate businesses running independently of each other. The 2 pay process has gone very well, and I think a lot of the colleagues who will be joining from this business are very pleased to become across the breed. But it will be a bit more time before we get in and really see what's going on there. We'll undoubtedly run it as a whole separate after we close it. But from our perspective, I think we'd made our own mind up. We'd probably run it internally as a whole separate through to the end of the year just so that we can focus on delivering here in year 1, but also not distracting the business from delivering in Breeding North and Breeding Southern. But I would say there's nothing here I mean, I'm very positive about this deal, and I've seen nothing so far that suggests it's not as good than we anticipated at the time. So it's an exciting point for us. As we mature as a business, we've had many conversations on ESG. And I think we sort of we didn't help ourselves because I don't think we told a very good story about ESG and where we were. And we knew we were doing a lot of good things here. So we're now with the help of some advisors, we're now starting to get a storyboard together. What's important is it needs to be real. It's not a veneer. This is we won't tell a story for the sake of telling the story. These need to be embedded in our business, and they need to be We've confirmed our commitment to the GCCA sustainability charter as we talked about. Our reporting for greenhouse gas emissions, we're 12 months earlier in that, and the scope of our report is more wide ranging than we're required to be. We have a non executive Chairman we talked about last year, and we've got 2 new nonexecutive directors welcomed into the business who bring different skill sets. So again, it's a very it's a positive for us. We've appointed a Group Head of Health and Safety and Environment, And I think we're very close to appointing a group Head of Sustainability. So exciting times for us. We also over the period, it became apparent to us that we were at risk of developing several disparate cultures throughout breeding as the different businesses come in and there are different maturity levels on purpose and value. So we delayed a 12 month, but following a sort of wide ranging engagement survey with our colleagues, we've launched Predence, Purpose and Values. It's been rolled out to the business overall, and I have to say that I'm delighted with the engagement we're getting through our organization. And I think you'll start to see more of this from Braden's perspective of it will start to become language that's meaningful as we move forward. Another area that we are as we mature and being a bit more transparent on is our group strategy. And what you see here is for the first time, but it will start to become commonplace, are the 6 pillars of our strategy. These will be clearly communicated priorities for the business, and it will allow us to monitor our progress against them. I won't go into much more detail here, but there's more detail in the various reports that you'll see, and we're happy to discuss them. And it'll become more sort of obvious and sort of there'll be signposts for where we want to take this business going forward. So let's look overall. In GB, relatively flat in 2020, growing in 2021. I think inevitably, we all believe infrastructure will grow. We just don't know about 6 months or 9 months or 12 months. But when it goes, we'll be ready. But as always, there'll be significant regional variations. I think this is where this is how neat the solution with Capital Concrete is because we're retaining a position in London. We're growing that position in London, but we are able to focus in the regional businesses and regional markets where we've always been successful and where, particularly the CEMEX business, the regional presence in that CEMEX business will help us there. In Ireland, the ROI continues to go along at a pace. And as we develop that aggregate business or indeed we were successful in completing some acquisitions in the ROI, That will only strengthen our position there. And not expecting too much from the north of Ireland, but again, if Stormlight gets moving and we start to get some investment there, we'll be ready as well. So Braden overall, Braden is in excellent shape. Our colleagues, the engagement level is high. I think people generally enjoy working at Braden, and I would say that in certain parts, we have our pick of who we would like to come into the business. And we pay a lot of attention to that because we're bringing the CEMEX business in wonderful assets and great people. But it's to me, it's about how you manage and how you allow people to make decisions so you have enough control. There's enough process that you get a degree of control, but you don't stifle the sort of entrepreneurial spirit that we'll bring in. So that's why we are able to take assets that other people have and deliver a superior result from them. And again, I anticipate that. Other than that, I think it's just reinforcing self help. It's a sort of double edged sword. If the market takes off and volumes rise, that gives us less time and less ability and less resource to do the self help. But again, the market will help us. If the market doesn't help us, we can turn our resource and our efforts to self help. And that's it's sort of worked well for us over the years, it will be a fundamental of our business going forward. And on that basis, we're extremely confident that we'll continue to make further progress in 2020. Thank you. We're happy to take questions from the usual suspects, I guess. Yes. As always, could I just ask you to tell us your name and your house for the benefit of the people on the call, please? Thank you. Clive Lewis, Deal Hunt. I think I've got 3, if I may. Rob, you flagged the 2 new metrics in terms of targets, free cash flow and return on invested capital. You didn't put any numbers on those though. Would you sort of like to sort of flesh that out a little bit? And particularly, I suppose, whether you've got any preference as to sort of margins, free cash flow or ROIC as to which one of those 3 is there a preference, I suppose. The segment I had was on sort of cost pressures that you're expecting to see for 2020. If you can run us through sort of what the key pressures are in the business and maybe talk a little bit about the prices relative to that? And the third one I had was on the Irish cement market. You've obviously sort of flagged strong reforms in Dublin, but could you maybe sort of flesh out a little bit sort of what's happening ex Dublin for the cement market there? So in terms of the first one and the metrics, I mean, we mean the margin target, as we said in the past, has been something we focused on. And if you remember, when we go back into the history and you look at when we closed Hope and it was a single digit margin, we then started to make progress again. We then closed Lagan and we went back into a sub single digit margin again. And so technically when you looked at those transactions in isolation and just on that one metric, You could have argued why were you doing those transactions, but they have delivered and they've delivered in terms of free cash flow. They've delivered in terms of return on invested capital. So we've introduced these two metrics for that reason. In terms of hard targets, you're right, we haven't. But on the free cash flow, 1, it's all part of the capital allocation discussion and it's all part of the ability for us to commence the distribution policy. So it's allowing us to have significant free cash flow to fund the business, to fund the M and A and then to be able to start that dividend policy in 2021. In terms of return on invested capital, what we say is that we want to cover our cost of capital over the cycle. And as we sit here at the end of 'nineteen, when you look at the ANA report and you look at the KPI tables, you will see that we are ahead of that at this stage in the cycle. In terms of the cost pressures, I mean, 2019 was a more benign environment for cost pressures. As we've entered into 2020, again, we've seen it more benign. I mean, if we talk really short term and the events over the last few weeks, I mean, you could argue that there's quite a lot of deflationary cost pressure. But as we've always said, for our strategic cost base, we progressively hedge into the markets. And so as we look into 2020, most of our major costs are largely secured and hedged. If there are benefits, we will look to lock those in. I mean, the one cost that doesn't go down and has continued to move forward is carbon. And Pat talked about how projects and things for the future start to be more compelling from a sustainability point of view. From Cement in Ireland, I guess what I would say is our position is we don't have much of a position in Dublin. It's obviously the fastest growing, the strongest market there, and it's a little frustrating to be sitting on the sidelines somewhat with it. So for us, we still sort of supplement the Irish cement business by bringing cement from Kinnegyad over to GB into Scotland and in England. And ultimately, our goal would be as the Irish market grows either through just general growth in the market or we start to establish a position in other parts of Ireland, we would repatriate those funds and sell them locally to get rid of the logistics of trans shipping through terminals and non boats over to GB. And so I think it's maybe more a reflection on our lack of strength in certain parts of the market over there. But that's clearly one we won't rush into, but clearly one that's on our agenda. Thanks. David O'Brien from Goodbody. A couple for me, please. Firstly, on lagging, you said the integration is complete. Is that to say you've extracted all the efficiencies that you see there? Is there more to go? And on that point, you mentioned the dormant quarries. I think there was 7 at the stage you bought the business. Can you give us a sense of how many of those have been opened at this stage? And on the dividend as well, could you just give us a little more color about how we should think about on a medium term basis the payout ratio, etcetera, etcetera? And then finally, you touched on encouraging and fostering that entrepreneurial spirit. Can you just give us a little bit more color? How do you actually do that when you go into new businesses? Yes. From the aggregate perspective in Ireland, we're moving north of 1,000,000 tonnes now. And when you take into account when we first got involved, that business was probably sub-three 100. So it's starting to move. It could move quicker, but one of the areas that the team over there have been very successful is adding reserves before they start to get the facility established, so get some minerals and try to get planning adjacent to them. So yes. On the synergies one, David, I mean, we as I said, we have hit the €5,000,000 run rate. We won't stop there. But it will just accrue into the earnings of the business going forward and is consistent with how we've done it and on the Hope acquisition as well. The benefits will continue to come, but they'll just flow through the organic growth of the business. The dividend, we what we're sort of intending to do is to probably over a 3 year period is to get to a level of dividend, which has a payout ratio in line with our peers. And I think for the guidance for the analysts now would be, we're going to start modestly and grow. I think it would be not unreasonable to put a penny in for 2021 and assume that a third of that gets paid in year as the interim and 2 thirds of it gets paid in 'twenty two. But I think that should give you the start point on the trajectory you need. On the CEMEX deal, maybe not from an entrepreneurial perspective, but one of the sort of quick ones for us there is the business has probably been starved with capital investment over the years. So it's either running older equipment or rented equipment or subcontracted equipment. And so I would think very quickly if we apply sort of Breeden's methodology of organically investing in the business. Generally, when you buy new equipment now and you're putting it in, you get a productivity improvement and you get some energy efficiency. And then I think you get you win the hearts and minds of the people in the business when they start to see that you're putting equipment into their business and you can actually you're listening to how they because these are the guys and girls that understand where the opportunities are in this business. So I think we did it in breeding. We do it with the acquisition we have. We'll be doing it in CEMEX, but it will be like 6 regional businesses that we are it's like 6 bolt ons for us. So and that's a quick win. It's a good return and it's relatively low risk when we are putting that kind of investment in any plant and equipment. Kristen York from A few from me. First of all, following that comment on the potential investment in the CEMEX assets, but also maybe tying in some of the sustainability investment at Hope. I mean, how should we look at CapEx over the medium term? Will those be covered by existing maintenance levels? Or should we assume a step up? The second one just on HS2 and maybe just a bit of color on the potential impact on industry volumes over the medium term. And then just the final one on pricing. Just where you think pricing is across the product categories in real terms really and whether there's more to go for over the medium term? So I'll do the first one. So Christian, we've consistently communicated that we will at least invest in line with depreciation. We will continue to do that. And that's one of the things that's differentiated us as a business. We don't see any requirement to change the guidance into the marketplace at this stage. If there are compelling investments in the years to come, ultimately with great payback, they will just be prioritized. From HS2, I mean, we're starting to see inquiries coming in, in earnest now. We've always maintained that we didn't want to be a sort of early player in HS2. Our core business, our existing customer base are what's important to us. So for us, any participation in HS2, and there will be some when I see the level of inquiries we're getting, will not be to the detriment of our existing business. Market overall, if the volumes are talking about and the timing they're talking about are coming to fruition, there'll be challenges on supply in that part of the market. And you would anticipate there'll be pricing improvement in that part of the market. And the logistics will have to be put in place because the current infrastructure won't be able to deliver that project without investment. On pricing, we going into the product levels, probably a level of detail that, A, we wouldn't probably want to do, but B, when we get cement, we're not allowed to talk about pricing in the UK. But generally, 2019 saw pricing in excess of inflation. But you have to put it into context. If you look at the back end of 2018, maybe look at the track record slide that we put up before, the business went backwards and we have those exceptional cost increases running through. So it's been about recovering costs. But we will continue to try and progress and ensure we are covering our costs. Kevin Kamak at same cost. Just looking at the margin improvement you've reported and the breakdown divisionally, it's pretty clear that the big impetus has come in the Cement division. And I just well, there's 2 questions around that. 1, I just wonder what sort of lies behind specifically that 170 bps improvement. And secondly, just looking forward, I guess, it's pretty clear to all of us how you can potentially see further margin improvement in GB and Ireland and the operational gearing that volume growth might deliver. But on the cement side, how close to sort of capacity are you? And what other things could be done to lift the margin even higher in that particular operation? So I'm happy to talk about the margin and capacity and cement. It might not be something we can talk too much on, but I'm sure Pat will say something. But on the margin, the improvement in the cement business, a lot of these costs I was just talking about in 2018, we're hitting our cement business. Whether you're talking about utility costs, whether you're talking about hydrocarbon costs, whether you're talking about carbon costs going up. And so you're really looking at the 2018 margin being depressed by those factors. And I think that improvement in margins. There's still I mean, there's still opportunity ahead in cement margins, I feel, Kevin. 1, we talked about it last year. The cost of carbon is fully embedded in Breeden's business. I'm not sure that's the case in every other cement business. So you'd have to anticipate as they start to truly reflect the cost of carbon in the cement business, we're going to have to recover it through pricing. And then in the sort of midterm, some of these capital projects that we'll look at, as I say, 2 years ago, we might have looked at them as a burden. But I think today, when you look at the price of carbon, where it is and where it's going, I think we'll be pushing on and saying actually these aren't a burden. These are a significant opportunity for us. So value enhancing rather than kind of stay in business. And how I mean, obviously, without putting specific numbers on it, but how important ultimately could be if you have the opportunity to reverse some of the exports back into the Irish market. Is that quite a significant potential factor for profitability? We haven't really done it yet. We're probably still doing about the same amount in HEB that we were. But there is it's a reasonable amount. If we can repatriate those tonnes as the market improves, as you say, I mean, you're shipping stuff to Glasgow. So there's a cost. There's a cost that much easier to ship it once in a truck to your customers in Ireland than it is to ship it to a terminal to load onto a ship to put it in another terminal and then deliver it by road. So there's decent opportunity there. Thank you. John Messenger from Redburn. Just following on from Kevin's question, are the 3 shutdowns that you experienced in 2019, would that did that not have a financial impact as well? I'm just thinking, is there a decent recovery that, that should help kick on in 2020? Or were those effectively cost capitalized that spread out going forward? Just to understand if there was a decent impact there. 2nd one was just coming back to this point about the change in metrics for judging yourselves. The free cash flow measure, is that going to be an absolute? Or is that a kind of conversion measure you're going to use? And on the return on invested capital, clearly, markets haven't been great in terms of backdrop. And when you look at your returns, you've lost 480 bps since 2015. For shareholder, is there is the 8.8 that you've just done, is that a floor? Or is that something that you're prepared to go further down on? Because I'm just thinking if clearly, acquisitions have been a dilutive factor in there. Does a better market kind of need to come along to support that return to then allow you to make more acquisitions? Just to understand the dynamics there. And finally, on your asphalt kind of purchases, given the storage and kind of how you operate in Ireland, is there a risk that you're caught with a higher asphalt price just in terms of the oil price reaction so far? Clearly, we'll see how that develops into asphalt liquid asphalt pricing. But where are you on your asphalt kind of supply for the year in hedging? Thank you. Okay. The shutdowns in the cement business, so we have 3 a year. And if you remember in 2018, one of those, the Kindergarten 1 was done pre acquisition. So it didn't impact. In 2019, you've got the cost of all 3 of those running through the income statement. And in 2020, you'll have exactly the same. We've actually done the first two already in 2020, and the last one will be in the second half. The free cash flow will be an absolute measure. We considered it as an absolute measure. We also looked at it from a per share. But in light of the capital allocation, and we decided that the absolute measure was probably the clearest measure for everyone. At the ROIC, the M and A, I mean, really, I mean, the deterioration is being caused ultimately by the M and A and the fact that in the current environment and the regulation from an accountancy point of view that we run through, ultimately, the goodwill and the fair value adjustments all go onto your balance sheets. Gone are the days when the goodwill gets charged to reserves. So given that and given they all come on the balance sheet at sort of cost and acquisition cost. And there is downward pressure on the ROIC. If you compare this to against the business who had acquired very little, but grown just organically, you would see a very, very different return on invested capital. And John, the example I often cite is if we acquired a quarry and we spent £10,000,000 to let's say, get £10,000,000 of reserve, there's £10,000,000 on the mineral value on the balance sheets. But if we spent £100,000 getting an extra £10,000,000 granted at an existing quarry, there's £100,000 on the balance sheets. But they both and they have 2 materially different return on invested capitals. So it's the balance sheets and the metric in isolation can be quite sort of misleading. I think the key thing is that the floor is that we've set it. So we will not go below WACC and we will look to improve it. But it will always take a dip Post an acquisition and post delivery of synergies and business improvement, we would then look to see that accelerating ahead of WACC. The WACC is at the moment. And then just on M and A, because obviously, there's talk about international expansion. Should we think of that going south or going west? Just to have a rough idea of where you might be. I see it doesn't include just on the definition probably Algeria. Algeria. I'm just thinking of some of the countries out there, but obviously it excludes a few. But I just have a rough idea of where you think most likely you'll end up going in terms of given the history. I'd assume it might have been West, but maybe realistically, ask for more South. So I'll deal with the WACC one. We'll come on so the WACC one, so it's mid to high 7s. So do you want to do the asphalt question? So I'll do the asphalt purchasing. Yes, sure. So in terms of the asphalt purchasing, we don't we do have some storage and we but it's not material in the context of the group. We and over in the island of Ireland, we as we said before, we do hedge an element of our forward purchasing on asphalt, but we're not speculators. And so we don't take a position, a speculative position. So we do not we will not end up with material exposures. And on expansion, I said we'd be somewhat transparent. I didn't say we'd be totally transparent. And I think for us, I mean, we have Amit Bhatia here today as our Chairman, and we have a completely reconfigured Board. So we have the strategy pillars. And what I would say is that in the spring, we'll be starting those conversations on board and challenging our nonexecutive board and our executives on what's right for Breton. So not avoiding it. We just don't have all the answers yet, but we know what the signposts are and we know what the criteria would be should we decide to pursue opportunities. Morning. It's Charlie Campbell at Liberum. I've got sort of 2 or 3. First couple on CEMEX and then the other one on GB Aggregates. On CEMEX, there's lots of people coming through, and you've talked about TP. Does that mean there's any pension liabilities coming across as well? 2nd question on CEMEX. With the CMA, I don't know if you can talk about it, but does that sort of imply that there might be disposals, so that there might be some risk to the upside that you get from those assets? And then on the GB Aggregate side, you can't really talk about cement capacity, but you could sort of talk about GB Aggregate capacity. Just how easily would it be to ramp up volume production into supposing we get an expanding market in the UK? At what point do you need to put extra CapEx to get, I don't know, quarries open or expand crushers or whatever it is to deal with that extra demand in? So the 2 pay process is going well, but we won't have any pension liability coming across with CEMEX. So there's no issue there for us. Disposals. Divestments, when we did the evaluation, and we have I mean, Breen has a relatively decent track record in evaluating the new acquisitions from the perspective of CMA. So we've always anticipated that there would be some divestments through the required remedies. We still feel the same, but we don't consider them to be material in the context of the transaction. So we're pretty comfortable with that Other than, as I said, it's taking a bit longer to make progress with the CMA. So 3rd one, AGS, GB AGS capacity. Yes. GB AGS capacity, I think we have in different regions, we have a different level of ability to grow. And it won't always require a lot of capital because we have a sort of method of running some of our aggregate facilities where we took out some of the old plant equipment and we bought sort of customized crushing mobile crushing spreads. So we have that capability in house to be able to move these crushing spreads and supplement manufacturing capacity at individual sites. So if the market took off overall, we have the ability to increase our aggregate production without throwing selling money at it. Can I have a follow-up? Just very simple one. What's your best guess now in terms of end markets that you're serving? If you can give us a little bit of help as to how much is GB Infrastructure, how much is GB Housing, GB Commercial and then sort of Irish end markets as well? So yes, our best estimate is 50% infrastructure roads and 20% housing and 30% a mix of commercial and industrial. The one thing, Guy, it's relatively dynamic. I mean, maybe I can say it again. If you look at our results in isolation of financial results, I think they're tremendous result. But if you align that to the challenging market, if you align it to the level of activity to get the CEMEX deal through designing, Roadway, integration of lagging, it's JV in London. JV in London, it's a testament to the quality of colleagues that we have in Breeden. And from what I'm hearing, I think we'll have the same level of quality colleague come in with the CEMEX transaction as well. So I think it bodes extremely well for us. And my arm's being crossed. There's not a reflection in the meeting. Okay. No more questions. Just to remind everybody, the presentation is up on the site. And also there'll be a full recording of this presentation a bit later on this morning.