Earnings Call: H2 2018

Mar 6, 2019

Good morning. Welcome, everybody. Just by way of introduction, as usual, we have Peter Tom, our Chairman and Pat Ward, Group Chief Executive Rob Wood, Group Finance Director. Welcome to everybody on the call and everybody in the room. And we'll start by handing over to Peter Tom. Peter? Thank you, Steve. Good morning, everyone. Thank you very much for coming this morning. Before we start, I would like to introduce 3 of our colleagues and Terry Lagan, the first one over there, who looks after the Lagan business in the Republic of Ireland Jude Lagan, who looks after our Cement business and Aidan Mullen, who looks after the White Mountain Business, which is based in the North. So we've asked them to join us this morning, and I'm sure they'll be happy to have a chat with you after the meeting and stuff. So I think we started out on the Bredesen journey 10 years or so ago. And without that, the year that's just finished was the toughest one that we've had to deal with. Awful weather for the 1st 4 months of the year and then a significant increase right across our input costs from carbon, utilities, oil and everything. And so and then we completed the acquisition of the Lagom business in late April. And I think the success of the integration, which has gone extremely well, is really shown in the cash flow performance. So I just would like to say how brilliantly our colleagues throughout the business have performed. And this result that we're going to go through in detail in a minute there's a huge debt of gratitude to the guys who worked and ladies who worked in all sorts of other companies. So I'll now hand you over to Rob, who will run through the numbers. Thank you, Peter, and good morning, everyone. Before I run you through the numbers, I just wanted to explain how we've reported our results for 2018. We have updated our operating segments to reflect the new structure of management reporting following the Lagon acquisition. The updated operating segments are now Great Britain, comprising the trade previously reported in Breden Northern and Breden Southern, along with the Building Products businesses acquired with Laggan Ireland, comprising of the Construction Materials Business and Contracting Services Businesses on the island of Ireland, which were acquired with Lagom and Cement, comprising the trade previously reported in Breeding Cement, along with the Cementitious operations acquired with Lagom. We've restated the 2017 segmental analysis on a like for like basis, and this 2017 restatement is really just an aggregation of Breeden Northern and Breeden Southern to form Great Britain. Turning to the numbers now. As you can see from the financial highlights, it's been another year of progress for the group. We have delivered revenue growth of 32%, underlying EBIT growth of 29% and achieved an underlying EBIT margin of 12.0%. Excluding the impact of acquisitions, revenue was up 2%. However, underlying EBIT was down 6% and reflected the difficult trading conditions in Great Britain and increased import costs. In terms of acquisitions, LAGGON's performance has been strong since his acquisition last April and benefited from the more favorable market conditions, particularly in the Republic of Ireland. Underlying profit before tax was up 12%, and underlying basic EPS growth of 14% reflected this. Lastly, the group continued to generate strong cash flows, and these were reflected in the closing net debts of 310,000,000 euros the 2018 closing leverage of 2.0 being a substantial reduction from the pro form a leverage of 2.6 at the time of the LACON acquisition last April. Turning to the income statements and revenue, which at 3 sorry, GBP 862,700,000 was up 32% on 2017. Excluding the impact of acquisitions, it was up 2%. At the earnings level, underlying EBIT, which we cut after Associates and Joint Ventures line, of €103,500,000 was up 29% on 2017. Again, excluding the impact of acquisitions, it was down 6% for the reasons already mentioned, being the difficult trading conditions in Great Britain and the increased import costs. The increased interest costs of 11,800,000 in 2018 reflected the high level of net debt post the acquisition of LAGEN. The non underlying items of 11,800,000 in 20 18 primarily comprised of lag and acquisition related costs, which included acquisition costs and also amortization in respect of acquired intangibles. Resulting profit before tax at €79,900,000 was up 12% on 2017. And the tax charge of £15,300,000 reflected the tax charge of 19%. The underlying charge was 17%, which was lower than the standard UK rate of 19% due to the impact of the profits generated by the Lagan business in the Republic of Ireland, where the standard rate is 12.5%. This all translated into an underlying basic earnings per share of 4.7p, up 14% on 2017. Turning to the segmental performance. Great Britain's performance reflected the difficult trading conditions, these primarily being the severe winter weather in the Q1 and the increased import costs, but also an element of Brexit uncertainty. In Ireland, our performance was strong and benefited from the more favorable market conditions. And in Cement, whilst our performance was also affected by weather in the Q1 for the year, the year as a whole, it performed in line with our expectations. In Great Britain, revenue was up 6% on 2017. Underlying EBIT was down £3,100,000 or 5%, and the underlying EBIT margin was 10.1%. In Ireland, revenue was £156,300,000 and underlying EBIT was £20,900,000 and the underlying EBIT margin was 13.4%. In Cement, revenue was up 25% on 2017. Underlying EBIT was up £5,600,000 or 22 percent, and the underlying EBIT margin was 17.8%. As already mentioned, LAGGAN's contribution has been strong, but it's worth noting that it was not acquired until April last year after the severe first weather in the Q1. It's also an appropriate time to comment on the Lagan integration. We've moved quickly to integrate the business and have delivered savings of £2,000,000 in 2018, the current run rate being £3,000,000 This puts us on track to deliver to our commitment of £5,000,000 of synergies within 3 years. Lastly, central administration costs are broadly in line with 2017, as expected. Turning to our products. Reported aggregates volumes grew by 22% on 2017. On a like for like basis, the increase was 4%. Reported asphalt volumes grew by 50% on 2017. And on a like for like basis, this increase was 2%. And reported concrete volumes declined by 3% on 2017, but on a like for like basis, they were flat. And that really reflects the impact of the tarmac swap. In accordance with the Cement Market Data Order 2016, we have historically been able unable to report our U. K. Cement volumes. However, following the acquisition of Lagan and the adoption of our new reporting segments, we are now able to report group cement volumes for 2018, which totaled 2,000,000 tonnes. In terms of pricing, increases by product category were in the 0% range in 2018. And Pat will comment further on the market shortly. Now turning to net debt, which stands at €310,700,000 at the end of the year. It increased by €200,900,000 during the year, and this movement reflected the underlying EBITDA of €154,400,000 non underlying costs of £7,600,000 a 12,200,000 working capital inflow interest and tax paid of a combined €25,700,000 a €44,100,000 CapEx outflow, which is net of disposal proceeds and net acquisition spend of €290,100,000 being net of the equity issued of €171,200,000 primarily in respect to the acquisition of Lagan. As a result of this, the closing leverage was 2.0. As already mentioned, this was a substantial reduction from the pro form a leverage of 2.6 at the time of the acquisition and clearly demonstrates the highly cash generative nature of the group. Whilst on the subject of net debt, the adoption of IFRS 16 in 2019 will not have a material impact on the income statement at the underlying profit before tax level. However, an increase in underlying EBIT will be offset by increased depreciation and interest costs. It will also not have a material impact on the balance sheet at the net asset level, but an increase in PPE will be offset by additional debt. We expect this additional debt to be approximately €45,000,000 On a pro form a basis, this will increase leverage at the 31st December 2018 to 2.2 times. This increase in debt will not impact our ability to comply with the covenants associated with our banking facility as these are tested by reference to the accounting policies that were in place at the time that the facility was entered into. Whilst not a group KPI, we do track return on invested capital. Year end ROIC, defined as underlying profit from operations after tax divided by the sum of net assets and net debt, was 7.9%, down from 10.1% in 2017. The reduction year on year was primarily due to the Lagan acquisition. Using average invested capital, it was 9.9%. Notwithstanding the modest anticipated decline, our ROIC reflects the high level of capital invested in the group and more than covers our cost of capital. In summary, it's been a year of further progress for the group. And with a Brexit caveat, we are confident that we will continue to make progress in 2019. Whilst talking about 2019, it's worth commenting on current market expectations. We understand that market consensus for underlying EBIT, CapEx and net debt, respectively, to be approximately €115,000,000 €60,000,000 €265,000,000 We are comfortable with the EBIT and CapEx expectations, but we now expect closing net debt to be in the region of €250,000,000 pre IFRS 16 or €295,000,000 post IFRS 16. I'll now pass you over to Pat to take you through his group and operational review. Good morning. Okay. I'm going to give some comments on the market. Most of you will be aware of the market background. But for Great Britain, when we sat here last year, we said we'd be quite comfortable if the market was flat. We're comfortable with that in our business. And essentially, that's what happened. The market was construction output was broadly flat. Significant variations and probably more so in ready mix than anywhere, and that will be somewhat ultimately, going forward, the assets, what we did with Tarmac, realigned some of our activities in ready mix. So for us, we're very comfortable with the GB market where it was. In Ireland, in the North and in the South, Construction output was up 2.3% in the North and estimated to have grown 6.1% in the South. I'm not quite sure how Terri Lagan influenced those numbers to keep the Southern one at 6.1%, but he's adamant that's the number. Great numbers for us. It's exciting to be involved in such a positive market, and both of those are primarily driven by housing and infrastructure projects. From the overall business perspective, I'll talk about the group and then a bit more detailed comment about the actual businesses. But as Rob said, better than expected performance and difficult trading conditions. Start of the year was tough with weather. The middle of the year was tough as input costs rose dramatically. And as normal in our sector, traction on price increase takes about a time as it lags to come through, but we did start to see some improvement in the back end of the year, and we would expect that to continue into 2019. Strong cash flows enabled the reduction in post lagging net debt and leverage. Significant investment in Minerals and capacity and operational improvements. I think what's important here is we have around 900,000,000 tonne of mineral reserve and resource, which underpins this business. You add to that 2 highly invested cement plant and then a population of aggregate ready mix and aggregate ready mix and asphalt facilities around the country. We're in good shape as far as our assets are concerned and also our people. We have over 3,000 engaged colleagues in the business now. Lagging integration is well underway. The asset swap was completed with Tarmac and 2 bolt on acquisitions were completed. Maybe the one area that we're not as happy with and we weren't last year when we did this conversation, and I don't think you'll ever see us sitting here in any year being happy with our performance and safety. But we had a in the second half of the year, we had quite a dramatic increase in lost time incidents in the business. Every injury or incident is an issue for us. Thankfully, there was nothing dreadfully serious, but it's still too many incidents in our business. I'm absolutely committed to the path we are on as far as engagement goes and supporting our colleagues driving it forward. We're not going to try and reinvent the wheel and throw out everything we're doing because we're convinced that what we're doing will get us where we want to go in the future. Interestingly enough, if you looked at the type of injuries that caused these lost times and you looked at our sector 20 years ago, it would be the same type of injuries. There's people trapping fingers and hands and falling and stumbling and tripping up. And some fundamentals will change that. Housekeeping will change it and engagement with employees. And there'll be some investment in the business as well, but this is primarily a cultural change in our business that we have to drive through. So it doesn't happen overnight. And the actual business reviews, in Great Britain, the start of the year was tough for us and weather rising cost impacted us. But we continue to invest in the business. We're so committed to the long term future of this business that we had some significant investments. I've noted here, Dowlow, we put an asphalt plant, which we'd been working on for the last 6 months, which gave us infilled some capacity shortage we had on the asphalt market. We invested money at Raisedby Quarry up in the Northeast. And following the successful opening of Northromboi Quarry, which is a hartstone quarry about 11 miles outside Glasgow, the closest hartstone quarry to Glasgow, we subsequently invested £1,000,000 and replaced the large ready mix plant that we have in the city center of Glasgow. That's part of Breton's story. We got the aggregate reserve, then we'll invest further downstream to use the aggregates, use the cement. We acquired Blinc Bonney Quad in the Southeast of Scotland, and the minimix offer was strengthened by Staffs Concrete. I think what's important here is these weren't significant investments, but these type of investments and acquisitions will always be very important to Breeden. As you look to the scale of our company now, it would be easy to lose sight in some of these transactions, but these are very important and these will continue to be a focus for us going forward. In Ireland, the market in the South continues to progress. It started stronger than this, but over the course of the year, there was a 65% increase in government maintenance tenders, very positive. I think at the start of the year, it was probably closer to 90%, but it evened out as the year went. And that's something we expect to continue to improve as the year goes on. And with our White Mountain business in the North, they've always participated in sort of projects in GB. They tend not to be just chasing high revenue projects. They look at projects where they can bring a particular set of skills to the project. And that was sort of prominent in Colley Lane and Somerset, a project in Kettering and a project in Wellingborough. And we continue to see this being an area of the business that we can continue to help White Mountain develop. We also participated in key infrastructure projects in the South. In Cement, all cementitious operations in GB and Ireland are now integrated, and that allows us to look at supplies out at Kindergarten and supplies in Hope and sort of optimize our supply pattern, including any external purchases that we were making. Traditionally, we would have bought cement from Spain and imported it into Dundee in the Northeast of England. So that gives us a lot more flexibility going forward. Major investment in the transport fleet for cement and in the mobile plant up at Hope Quarry, which feeds the cement plant at Hope. For 2019, certainly 2019 can be a challenge pending the outcome of Brexit. But for me personally, I'm in a much better position today than I would have been 12 months sitting here. I think we took we talked about it last year. We took some of the pain in the input cost increases, and I believe you don't save your way out of these kind of cost increases. So I'm convinced that there'll be price improvement in the marketplace. And I think, as I said, we've seen traction at the back end of the year, and we'll continue to see it this year. Safety will continue to be a focus for us. Engagement will be a focus, investment in safety. And I'm not talking a lot of money, but small investments in plant and equipment and housekeeping will pay dividends from a the evidence from a safety perspective in our business. For the medium term outlook, we're very comfortable where we are and where the U. K. Will be infrastructure and housing. HS2, we're starting to see some projects awarded there. That's not a project there that we would expect to be front and center on. We won't be chasing high volumes on HS2, but some of the work that comes in its sort of wake. That's a type of work that we think we can bring value and bring some of our expertise there. But it's good to see that activity starting to pick up. But entry into Ireland has diversified our market exposure and has given us a new platform for growth. That's not to say that the businesses in Ireland, in Terry's and in Aiden's business, were growing anyway. They had started to build a platform for their own growth. So for us, it's quite an easy transition. And maybe at this point, I would say that we're delighted with the contribution of lagging, the lagging business for 2018. But it's all down to lagging. It's all down to the quality of that business. It's all down to the quality of those people. It's down to the quality of those assets in the markets they're in. There's very little influence have come from Bredin. So that delights me that the 2 businesses within their own right are delivering value. And that speaks for itself. I think we have a more talented and experienced management team today than we did 12 months ago. And I see that as it gives us a great deal of confidence going forward. The Hope integration, when we closed Hope, the integration went smoothly and probably quicker than most people expected. And the cash generation was significant. The debt reduction rate was probably better than anticipated. We're seeing the same picture lagging. And as we move forward and look at other opportunities, which we're always doing, I have every confidence again that this management team is capable of moving forward, and we have the bandwidth to take on more. As always, we're very active for acquisitions, be they bolt on acquisitions or be they more significant than that. That always that will always be a focus for us because it takes time to develop these relationships and sort of execute these transactions. So we haven't been distracted by the level of work in the integration and some of the disruption in the marketplace. That's still a key element of every day for us. And if the market doesn't help us, and again, I'm comfortable with a flat market. If the market doesn't help us, we have a much bigger platform now. We can go back to our sort of what's in our DNA and self help. We can make operational improvements. We'll continue to invest capital to the levels we always have recently up to around 100% of depreciation. That will continue with confidence there. We have confidence that the type of projects that we'll be investing in will bring a greater return. What's particularly pleasing is we don't have to search high and low for these projects. These projects come from the business, and we get the opportunity to challenge the projects and invest the money where we know we'll get the return. But we're not short of projects for organic investment in our business. I guess the last point I would make, and Rob sort of caveated it with Brexit, As we look at risk, we don't see the Brexit impact being material. They're fairly local businesses. There's not a lot of cross border work. So as we've looked at it, we don't see huge materiality to potential impact for Brexit. So I'll go further than Rob, and I won't caveat it with Brexit, but I'm very confident that we'll continue to make significant progress in 2019. And with that, I think we're closed from that perspective, and we're happy to take questions. Thank you, Pat. Could I just ask the guys in the room, when you ask a question, could you just give your name and your house for the benefit of the people on the call? Just wait for the mic to be passed to you. Thanks very much indeed. David O'Brien from Goodbody. Just a couple for me, please. Firstly, on energy costs, can you give us a sense of what the headwind year on year will be? And then more broadly speaking, given the traction you're seeing on pricing towards the tail end of the year and into the start of this year, how should we think of price cost spreads in both the U. K. And Ireland for 2019? And you've touched on if there's other acquisitions in the pipeline, can you give us a sense of the differences and opportunities in the U. K. And Ireland at the moment and whether or not you're comfortable transacting churn in 2019 given the integration of LAGEN? And also maybe a little bit more color on the opportunities around the delivery of high PSV stone into Great Britain from Whiteman? Yes. So if I do the energy costs, if I lump it into input costs more generally and do it by reference to 2018, it will just really relate to the legacy breeding business. But as we've talked before about where hydrocarbon costs have gone from the I don't know, from the circa $50 up to the circa $70 whether we talk about carbon that's gone from less than €10 to north of €20 or whether you talk about electricity where it's been widely trailed, the increases that have come through. The results in 'eighteen were probably impacted somewhere between £5,000,000 to £10,000,000 by that. So when you take that into context of the resilient GB performance, you can see that even though we had those headwinds and we had the weather in the Q1, we have moved that business forward. In terms of pricing, well, if you then look forward in terms of input costs, as we look out there today, there's still inflationary pressure, but it is not the step change that we saw. There's been a shift in the markets, and we wouldn't expect the same magnitude of cost to flow through again. In terms of pricing, do you want to touch on pricing or Go ahead with that. Well, I think, you mean, ultimately, it's like everything. We'll look to we need to recover costs from 2018. We've always quite often talked about lag times on things like bitumen and cost recovery. And so we need to seek those recovery in 'nineteen, and we will be moving prices forward. And we have a bit more visibility in the input costs as we move forward through the year. And we're confident that what we're attracting levels of price increase will contribute to the numbers that Rob talked about for the business overall. So we're comfortable we don't have that exposure in compressing the margin for 2019. As far as high PSV goes, reputationally, White Mountain is a great high PSV stone. Traditionally, they've supplied any GB. Most of us have been customers of them at some point. They have expanded the facilities where they can bring material in. But I think for us, the opportunity becomes we're a significant asphalt paper in the north. We're significant in the south of Ireland and the north of Ireland. We're not in Southern England. We're not in England. We see that as an opportunity. So as we start to grow, in fact, White Mountain does more probably more paving in England than we do as Breeden at the moment are certainly at times in those projects. So we see if we can leverage the skills on White Mountain and the expertise in White Mountain and help leverage our asphalt business in the South. And you could see we did the Highways England project with Bo. So I think we can gain a couple of years in the development of our paving business in England, and we can align that with looking at specific projects and utilizing the high PSB stone. I might not move more high PSB stone over, but it may internalize more, which gives us the opportunity for contribution at various levels in the supply chain. Is there another part? Well, our priority right now is to pay that some debt down and demonstrate that we can generate the cash and reduce leverage. But you can't always choose when the acquisitions come. And I think that's why we've been quite prudent in our statement on dividend at point because we feel there's certainly enough potential acquisitions out there that we want to make sure we keep our powder dry, that we don't miss an opportunity. As I say, the acquisitions will be dictated by cash essentially in debt, not by management, bandwidth and opportunity. And I'm equally comfortable whether those acquisitions are in Ireland or in GB because we have quite rigorous protocols in place before we do a transaction. We won't do a transaction for the sake of doing one. So if we do one in Ireland or we do one in GB, it's because it's sort of passing our hurdle rates. Next question. Sorry. Howard Seymour from Numis. A couple, if I could, please. Firstly, on the pricing. Just looking at the sort of the larger aggregate companies out there that clearly seem to have done an awful lot worse than you have and taking costs out, etcetera. Two things on that. Do you perceive that they would be looking for price increases? And secondly, strategically, as they're doing that, does that provide more potential acquisitive opportunities for you in the medium term because they don't seem particularly wedded to the market? Yes. If I take the last part first, yes, we've always thought, as well as independent acquisition opportunities, that there may be the tarmac swap we did was a good example of it, but it was beneficial to both businesses. But as the majors look and maybe refine their footprints, then absolutely, that's an area we'd be very comfortable looking at. And I would hope that those companies see us as a natural acquirer of those. Pricing, I think you saw the input costs rising. We see certainly see people in the market taking headcount down, but that's because there was too many people in the business. We have quite a flat structure and our people work very hard. So we don't have to take those layers out with our business. But there's only so much that will cover that people aren't going to save their way through 2019. So in order for them to deliver to meet their shareholders' expectation, we have to see top line improvement in the marketplace. Secondly, just ask on cement. Clearly, it's an industry driven by the technology. I'm just trying to get a feel for the dynamic last year, obviously, is lagging cement, wasn't in for the full year. Therefore, there's potentially an additional cost on that. But as you look at the two plants, is the capability to get margin gains through sharing technology, etcetera, best in class? Or are they fairly similarly matched in the context of underlying performance? I think there's always sorry, I think some of the easy improvements for us will be in logistics and distribution, and that's something we can go at quickly. But undoubtedly, hope we'll have some investment opportunities in the future sort of piggybacking off of some of the technological advances that Lager have made in Kinnegaard. Now it will be some of it will be opportunistic and won't take huge chunks of capital and some will be significant multiyear projects, but we'll have they're not need they don't need to happen. However, these will be projects that will be a significant payback that will sort of encourage us to make that investment. But there's always I mean, we can talk with Jude a bit at the end, but there's always stuff around the edges where, in fact, Jude, very quickly, they organize teams between Hope and kind of got not at the most senior levels, but at process engineer levels and various other parts where they're sharing best practice across the business. And that's happening sort of throughout it now. Initially, it was something Jude had to drive, but it's starting to happen on its more and more and more. So yes, some of the improvements, however, I don't think we know about yet. But clearly, it's an area that we see opportunity. But we also see it in aggregates between lagging and breeding. We also see it in asphalt between lagging and breeding. I think we got a lot to learn on paving from Terry's business and from Aidan's business. So those are the areas that are just part of our everyday job. But there can be 40 levers that we're working on to influence margin in our business. Next question comes from Robert Gardner from Davy. A couple for me. So one, you mentioned in the documentation you talk about the consolidation opportunity in aggregates in Ireland. So I'm just wondering what's the kind of size scale of that? Is it just small stuff or is there more you can do there? 2, you mentioned in again in the piece there, you talked about competition moving out of Central U. K. Into Scotland. And I'm just wondering what kind of competitive dynamics are like in the 1st months of 'nineteen. Are projects being deferred, delayed? How that's working? And then 3, you also mentioned your margin target, the 15% EBIT margin target. I'm just wondering how that chops and changes with lagging in there. And also wondering, again on the ROIC, you showed us the 9.9%, but how does that look with a 15% EBIT margin target? Or how do you think about that? So I think our priority in Aggregates in Ireland at the moment is sort of leveraging where lagging have gone already. Lagging had started to over the last probably 3 or 4 years, started to buy some dormant aggregate assets and acquire some land and minerals around them. So I think our initial priority will be to help Terry execute the plan he had in place to get to build an aggregate business in his own right And he has some of those assets in place. Beyond that, I would expect there to be small bolt on opportunities in aggregate. I don't see wholesale change in that market, but bits and pieces around the edges. We're not incredibly active at the moment because there's a lot in our plate to sort of help get up and running. But opportunities will come to us, I think. But I don't see them being wholesale. I see them being sort of small regional bolt ons, whether it's aggregates in Ireland. What's the second part, sorry? Competition in the U. K. Competition in the U. K? They mentioned We've seen both, I mean, we were awarded some further work on Woodspeth, the Sirius mine. Mine. The A9 in Perth was awarded. There's delays, but I don't see them as Brexit related delays. 4 years ago, there was delays because of execution of the National Infrastructure Plan. So there are delays, but those delays, RAF loss in mining is probably delayed a month or 2. But there's other projects that were delayed last year are being executed now. So I don't see a step change on the project execution in our marketplace right now. And I think what's helping that's probably one of the areas that's helping pricing move forward in the marketplace. Last year, I think there might have been an overreaction to the sort of shortage of work in the first quarter, which was primarily more weather related to market related, but sometimes people jump the gun and take remedial action, not realizing the market is going to be flat. Your last question was on the margin targets. And we hold 15% as our margin targets. And we say the medium term. As we've always said, we've the team have all been in businesses where we've achieved those. The Lagan business does have an impact on mix. But as we said at the time of hope, ultimately, the mix has a short term impact, but it doesn't actually change the targets. It might just change the year of achievements of that target. And I think quite clearly, I mean, I don't have the number in front of me, but quite clearly, if we achieve that margin, the ROIC moves well into double digits. And Rob, in some of the sort of legacy breeding businesses, you are moving rapidly towards 14% at this point. So it resets when you bring in an acquisition dilutive, but that just, again, gives us a platform and move forward. John Messenger from Redburn. 3, I think, if I could. First one was just coming back on Lagan. When we think about the 4 month contribution to kick in, in the year ahead, we can see there's about £48,000,000 of sales increment last year. But last year, it lost money in that 1st 4 months. Clearly, there was the weather, hydrocarbon, etcetera. With the run rate of savings, just to give us a feel, is lagging in a 4 month period like that? Is it reasonably profitable? Just to understand what we should be thinking of that kicks through in the current year. Yes. 2nd one was just around cement pricing. Thanks to the new breakout, it's good to have an average cement price across Northern Ireland and the U. K, which is about £88.25 Can I just to have a feel, is that very different from that side of the water to this side? And secondly, did you move pricing up during last year? We normally think of April, but actually because of the hydrocarbon effect, were you putting through price increases as the year evolved? And I know it's a sensitive topic, but is there any way you can give us some kind of view on what you're pushing for this year in terms of that? And the other question on that was, with 1,000,000 tonnes of production, do you produce about 1,000,000 tonnes of carbon or just over? And did Lagan with, I think, Jude having possibly having a bit of dowry of carbon credits, were you kind of covered in 2018? And will you be covered again in 2019 in terms of carbon already acquired to cover you? I trust you. You get us in less trouble with this problem. So it's not doing this. So if I could try to scribble. Question number 1, Q1. 2, 3 things that you need to bear in mind for the Q1 of 2018. 1 was Terry's business, particularly Republic of Ireland's on a fiscal year in terms of work awards. And historically, Q1 has been a loss making quarter in that part of the business. 2 was the major kindergarten shutdown historically happens in the Q1, the cement plants. And 3, as I sort of alluded to in my part of the presentation, the Irish market wasn't immune to the impact of the beast from the East. So those are the 3 sort of numbers you need to take into account of what the Q1 would be. And I think from that, you'll see that we benefited from 8 months of strong performance without those costs in the Q1. 2, in terms of cement pricing, no comment. And it would be wrong for us to say any more and spit it lower than the group. We have the ability now to give you a group level disclosure and some group level volumes, but we're still required to comply with the Cement Market Data Order 2016 in respect to the U. K. So it'd be inappropriate to say anymore. Where were we then? I sort of lost track of your questions then. Carbon. So as you know, the carbon emissions information, as you personally know well, is public information. We across the two plants, we do have a requirement for somewhere in the region of 300000 to 400000 tonnes of carbon permits per annum. And we do have a strategic purchasing and hedging program in place, John, that means that without disclosing how much, we have an element of hedging in place in respect to both plants. Can I just come back one just one thing? On cement though, within the bounds, last year because we normally think cement prices get struck in that spring season. Clearly, your business is not as tied to some of those longer contracts, and you've got a bit of flex. But did the cement price sequentially did you achieve rising prices through the year? Or is this year the year you need to get a decent step up in cement prices? And for you guys, which is the bigger cost, electricity or fuel because of the use of alternative fuel? I'm just thinking electric is more discreet in that you're grinding clinker. Everyone's going to incur broadly similar electric costs. Therefore, everyone should want to push that through. Just a bit of a feel as to how competitive you think it's going to be or how successful to your point, Pat, you're not going to cost save your way out of this. So it's got to be about putting the top line up. I think from a timing perspective, I don't think our cement business is any different than most. You have tend to have a lever over a broad period sort of a period during the year. I guess all I can say about how the other part is, we've the programs Rob was talking about, we have really good visibility, be it power or be it carbon, be it bitumen. And I'm confident that what we're seeing and what we're experiencing, will get us where we need to be in relation to the cost. We have more visibility in cost than we would have had, so I'm and I'm comfortable that we can take our business forward in pricing relative to costs. Is that vague enough, John? John, just on your the split of costs and things, as you're quite rightly say, you mean electricity is a significantly more material cost than carbon? Yes. So given Camacho, same cost, just one wrapping question on Ireland. I wonder if you well, 2 things actually. Could in the new divisional split, could you just broadly confirm that it's still true that it's roughly fifty-fifty, north and south, within the Irish the new Irish split? And secondly, I wonder if you could comment on the sort of outlook for growth in the Republic generally, whether those construction output figures that you gave for 'eighteen, what sort of trends are for 'nineteen and whether it affects certain businesses more strongly or less strongly than others in terms of the products and segments of where that growth is coming, just to give us a real confident feel about where Ireland is heading? So just the first part of that question, you were trying to understand the element in GB, the proportion between Northern and Southern or No. I mean within Ireland. Within Ireland. Wait a moment. Is it roughly fifty-fifty between north and south? Are you ignoring cement or are you Ignoring cement just in the new split of Ireland. I think I think Yes. And you sort of talked about broadly speaking, a third, a third, a third. Yes. You're right. When we did that, we did and we did a third, a third, a third and then 10% for Welsh Lakes. And I think where we are, it's quite clearly that the growth is coming through the South much more than the North. So as we move forward, you'd expect more of the growth to be coming from the South. Rob, you mentioned, I mean, there was recent numbers yesterday on Yes, there were some numbers yesterday, which were that are relatively recent. But this was the investment in building and construction, I think, in 2018 was going to be €26,000,000,000 in the South, up 20% on 2017 and that 2019 is forecast to be €30,000,000,000 which is an increase of 14%. One statistic was quite interesting was that in 'nineteen, they expect 25 major infrastructure projects to be started, and they refer to a pipeline of 271 in the future. So I mean, the forward looking outlook for the South is very strong. Would you say that's faster growing than residential, for example? Well, residential is going to be a big driver of the growth in the South as well. I haven't got that stat in front of me actually, but I think it's something like 25% of the spending is residential at the moment. And we need to be a wee bit careful with that because obviously a significant aspect is Dublin. And Dublin's we're not a massive player in the Dublin market. Okay. Any further questions? It's Charlie Campbell at Liberum. You've given some pretty clear guidance on net debt for the year clearly. But just to think about the moving parts within that, is there anything in the cash flow, particularly in 2018, that was, and in any sense, one off in nature? Because very strong working capital movement. But anything one off that might reverse? Or you expect to keep those gains and maybe even move on from that? Well, nothing particularly in terms of one off. But what we are we have said is that we had a very strong performance. And we've said, I mean, in terms of the guidance we've given is that we believe we're going to hold on to an element of that, and it will be ongoing improvements. So I think the beat was approximately 30,000,000 pounds and we've moved forward the guidance that 15,000,000 should be shaved off the forecast for next year. So I think that gives you an indication of you wouldn't expect to get a GBP 12,000,000 positive working capital benefit year in, year out. If there's no further questions, there are some sticky buns and coffee and things at the back and we'll carry on from there. Thank you very much for coming. And the 6 months results will be on July 25. Thank you.