Earnings Call: H2 2019

Feb 28, 2020

We get to go with you. Excellent. Right. Good morning, everyone. Good morning. Welcome to another day in stock market paradise. I don't even want to ask another question, so I won't bother. Today, will be joined. Lily and I will be joined by being personable, the Managing Director of the Packaging Division who will talk a bit about the progress in the last 2 or 3 years and the outstanding job here in the team are doing. I have a number of my colleagues around, so please feel free to to color us, afterwards. It's a normal format. I'll start by giving an overview label, to a deep dive. Into the numbers. I will then actually talk a bit about the longer term. Clearly, when we're in, more in structure mode. It was all about the short term, but but we have a a hugely exciting business with fantastic wealth of opportunities, and just trying to bring that to to life. We'll give you an insight perhaps into how the business has evolved strategically as well as operationally. So three key messages, ladies and gents, And of course, of 2019, we have, significantly, simplified focused this group. We've gone from effectively 99 businesses to 3 global divisions. As I will try and demonstrate and as as Dean will try and demonstrate the context of packaging, I think the key is that all divisions are now set well and while beginning to demonstrate organic and inorganic growth. And the final thing, notwithstanding, certain uncertainties, etcetera, is that the underlying performance has been in line or submission ahead of expectations. When I talked, at the interim, I said that we are entering chapter 3, let me let me remind you what the chapters were. Chapter 1 was really about saying we have we have a business that's immaterial, downward trends. We need to stabilize that. And, additionally, we actually need to figure out what these businesses are capable of and how they can look in the future. Sales chapter 1. Chapter 2 was really about, continuing the stability journey, getting an inflection point, and actually saying what do we want to be? What do we want this portfolio of businesses to look like? And so in the context of, that activity, 2019 was was very significant. It saw 4 disposals. It saw 3 acquisitions, and it saw the announcement of the China joint venture. As I will demonstrate later, we believe that the divisions are on track against our strategic milestones think we've learned the right not just to assess ourselves on how we're performing against backward looking financial parameters but it's actually also about saying as we build to the next 1, 2, 3, 4, 5 years, are we on track? Just A quick counter through each of the businesses, obviously, will go into into more detail components, which you will recall is primarily linked to the performance of the whole industrial, production industry actually held revenue and margin steady. It is a it is a fantastic business and it's resilience and actually the quality of performance, in its customer service angle, really did ensure that it held well despite downward pressure, from training industrial production environment. The 3 acquisitions that we've done microplastics, Priscilla, and mostly to meet integrated components, are all on track and to take microplastic, the longest standing acquisition of this period it's actually exceeding our financial expectations. Filters I have been talking to you about the claim changes. I said by December 2019, we would decide whether to, official cut and date on each of those. Fortunately, we have caught fish of varying sizes, but we do have progress, substantive progress on all three, and we can talk more about that in a minute on the margin to a house label. Ian will justify this this big statements that this is the best overall performance in Packaging Twenty It's been, and I'm delighted to say that Nicky Taser is, the acquisition we did in Spain in September is doing well. Our stability agenda, getting the basics right. Again, I'll just mention like that because that has continued its progress on all metrics in all businesses. At the beginning of last year, we started this business process redesign project I said yes. It was about going from 46 or 47 ERP systems for 1. But it was also about taking the opportunity to take this into 19 projects. This is actually about designing, processes that are joined up that are efficient and will enable us to pursue this growth agenda. Linked to that, We will be looking at our G and A expenses. We'll be looking at how we work smart rather than harden. I'll be talking more about that at the interim. Underlining the financials, in line with expectations and underlying profit growth. The thing to remember is that when you look at 18 versus 19, we have net sold 8 and a half, 9 or so £1,000,000 of profit. At the next of the disposals in the year. As we will come and hopefully, I'll show it to you We expect further progress in 2020 strategically, financially and operationally. If you look at the, the numbers and obviously Lily will cover this in infinitely more detail, 1 a half percent on an underlying basis in revenue, and I'll I'll I'll put that in some kind of historic context. At a headline, 5.5 percent operating profit down on a, underlying basis, 2%, up reported operating profit of 80 versus 40%. We had a lot of, one off adjustments in 2018. You can see therefore that the reported basic EPS 14.7 versus 9.3. Net debt is two times before sorry. After IFRS 16, 1.9 times before. And we are maintaining the dividend at 20.7 for the full year. It has been a busy year just to to walk you through some of the events. In January, we sold, the first of what was the specialist components businesses High Protection Technologies. We acquired the balance, which is 49% of our filters are joint venture in Dubai. In June, we sold our Extrusion business in Holland. We acquired innovative components in Chicago and Costa Rica, and we sold Speciality Tech Stream as a particularly a busy month for Katrina Lane. And then we followed that up by a relatively small divestment of our card solution business. First acquisition in a long time packaging, Mister Kaza, and we'll talk about that. And what we did was also transfer care tapes into filters and leave our our industrial supply distribution business into components. The form of reflecting the fact that there's a strong overlap in customers that takes the largest customer base is the tobacco NMCs, and we're already seeing the benefits I've actually been able to offer and talk about a broader portfolio, and Reed has gone into components. And then, excitingly, we announced the JV in Charmin, at the end of November. I said that I've tried to contextualize this. You can see at the group level underlying revenue, minus 9%. Okay, minus 2%. We're saying plus 1.4+1.5. And from the low point of 8.2 percent operating margin, we continue to to increase there. On an underlying going on to packaging, in the lower half, you can see that from minus 9% we have been up to 5 a half percent. And the the financial metrics that we put around the recovery journey on packaging are 200 to 250 basis point margin and 5 to 6 percent, sales. So Ian and the team have delivered that, and you can see there we had a 200 bit improvement 18 on 17, and then we had a 270 bit improvement. So as we will talk later, we remain on track for our state to target, obtaining industry standard margins of 8 to 10% in 2021. I'll just spend a little bit of time, if I may, talking about what's been going on in components and filters before I I hand over to to Ian. Excluding rates. So the debt that was transferred in, positive revenue on a like like basis and, operating margin broadly. Maintained a whole essence of this business that's applying small quantities small components exactly when the customer needs it, and what we call hassle free service provision. As you see, about halfway down, our service levels on time in full have improved by almost 2 full percentage points to 94.3%. That has been given the complexity of supply chain. And given we have no improved systems, That is very, very major progress. What's really encouraging as well is this NPS Net Promoter Score, which is a a measure of customer satisfaction, record score of 41. Broadly, I think, received wisdom is that if you're anywhere above 30, you tend to be in market share gain territory. Just calling now one particular product category which we got into through the acquisition of a company called Nissan in in Turkey, access hardware, and you can see a little picture of it at the bottom right there, particularly strong. And interestingly enough, the innovative components product ranges is very complimentary, and I'll I'll I'll just put that in a second. This is a business with tens of 1000 of products and 10,000 of customers. And whilst they do not purchase online, Our customers, if they want to find the right space bar, the right nylon screw or whatever, will, in the vast majority of instant is go online. So actually having a a a good state of the art, website was a particularly personal challenge. We invested some £5,000,000 or so in the comp in, in 2019, and have deployed into 10 countries, which is about. Now we're up to about three quarters of our revenue. And it is like night and day. So that we have had very, very positive feedback from And what that does is it enables us, which is probably the single thing if we were to make anything, right, which is cross selling of categories. So we have a whole range of district categories, and customers actually need most of the products. So our ability to sell cable management and caps and plugs to the same customer is the simplest, easiest way. To make progress. It is so much easier to sell more to an existing customer and to procure new customers. We talked about the importance of hassle free service of actually having the right product in the right place at the right time, and our our logistics infrastructure is vitally important for that. So lots and lots of manufacturers new distributors. There are lots of distributors that source from, other manufacturers. What we have and what makes our business model unique is we have world class capabilities both in manufacturing and warehouse. And, clearly, you can do that through through know how and through If you like the the inside of your people, they're actually having the infrastructure in place, and you can see there's our our Houston, Texas warehouse and it soon to be joined by new one in about 5 months time in Germany. This will simply just enhance our capabilities and in a Brexit context. It will reduce our lives on our Peterson, Oxford warehouse. We talked about the improvement in in service. We talked about the fact that all acquisitions are doing well. It is important what we keep doing those kind of innovative components type fields. Typically, and I've talked to a lot of you, about this. We'll buy a 7 or 8 times multiple. We'll try and get that to 5 or 6 times multiple office images. And if you look at the value that is described on the sum of the parts basis, by the Emerald Community Limited Limited today. It tends to be valued at about 12 or 13 times. We refer to it internally as doing a bundle, effectively, what we do is we build up a pipeline of invariably private companies, small, mid, mid cap, and foster those relations and at some time or other, there will be an opportunity to do something structural with them. And the other point, we're 1 year into our 5 year program, We are starting with the financial procurement. And then from an operational point of view of Components business, and in that context, the milestones that we set for ourselves in the 1st year are on track. We talked about innovative components. It's in Schaumburg in, Chicago. What does it make make some noise pins and handles. They're not a 6 and exciting company. I'm sorry, but that kind of thing really failed to turn it on. What does it do? It complements potentially that access hardware, stuff that I told you about. What it cost for innovative components, they have 10,000 customers as our products, now they have a 110,000. We have 90,000 product lines to offer. Now we have a 100,000 order of magnitude. What also does is it adds manufacturing capability in in Costa Rica. That is a phenomenally talented call a very, very well trained young people in in Costa Rica and and that's a real asset for us in the future. Fords Fords underlying the marginal decline in in sales, underlyingly much better than the overall tobacco market. The key drivers of that 2 fold. 1 of which is, China. The joint venture that we announced was important both offensively, but also defensively. China perceives the tobacco industry as very, very important strategically It provides 8% of all of the Chinese government's income and as we've seen in other strategically important industries, so it's looking to internalize it. In fact, is that we've selected, blessed by the Chinese State Northland are working and in partnership before the largest provincial manufacturers. So that's a really exciting opportunity and the counterbalance to this internalization trend. The other point in that we will talk about it is that there were some challenging market conditions, frankly, we chose in light of, some compliance issues to actively walk away from business because we would rather lose revenue and compromise the standards, and ethics that we set for ourselves. Excluding that Middle East, this business actually shows a positive growth. And The really encouraging thing is with the same changes, we believe that for the medium to long term, mid dig mid single digit growth is the kind of path of the course that we can expect in that business. And and things like that for the last decade and a half. We've talked about the fact of the development, October 1st, we integrated tear tapes, into the division. The expertise has helped improve operational performance. It is 50% or so reliant on the typical industry, but if you look at things like resale, abs. If you look at the kind of ripper tape that views on on Amazon, There is a clear and an emerging and a very distinct trend to broadening that product portfolio without losing focus on the core of that business. We talked about the fact that the China JV had been signed. We had our first major outsourcing over 6 years, with order magnitude tendering per annum. And I'm delighted to say that this week, we have also had, another large outsourcing award with another major MNC, and there are other discussions going on as well. And in the next generation product, for those of you who perhaps are not familiar with actually 2 kinds of product. 1 of which is heat not burn or THP dependent, which which radiology prefer and fighting. The exciting thing particularly about heat and burn is basically affiliated with a little bit of reconstituting tobacco. There are I cannot think of a manufacturer in this space that we are either not providing, product to or doing, pilot developments with. Clearly, we can only grow as fast as that market. It isn't a significant part of the moment. But it does also give a strategic optionality and almost strategic hedging. And then the basics, we talked about stability strategy and growth. The operational KPIs and I'll I'll put some numbers around it later, do underpin the fact that we can claim to be genuinely world class And just as a, if you like, a a strategic footnote, we, along with one of the MNCs as the largest manufacturer now, of special filters in the world in January, early January before you called back away from me. And it's in Charlemagne whether slightly zero category at 0 cases recorded. I have the the pleasure of formally opening the, the joint venture with the 4 led by Fujian Tobacco. You can see in the bottom chart there, although China has about 20 Central World's population, it has 45 percent of the cigarette 5,300,000,000,000, and the the check the the Chinese managed to get through 2,300,000,000 of those. I might believe something like that. 2.4. Quite a lot of cigarettes. We will earn a 49% shareholding that we have management control, and we will be able to to consolidate. The really exciting thing is that we have, and it's the penultimate bullet point in the in the in the brackets there. A penetration of special cigarettes is about 4%. It's four times that in the rest of the world. Why is that important? It's important because the home strategy of China is to increase the revenue gets by upgrading the product mix. Are you going from standard cigarettes to ones that have nice shapes or how capsules or slims or super slims or whatever. So if you think about the potential there, we derive less than 10% of our sales from markets at if it goes to, normal levels of penetration should play four fold, so that truly is a game changer. The plan there is to start with product development and sales, and then we should have manufacturing operational within 12 months. Until then, we will continue to serve it as an export market out of Thailand and Indonesia. So that's a little bit about components and filters. Before we hand over to Lily to do the numbers, I'll ask Ian to come up, please. And Hello, sir. What's been going on in the last few years? Thanks very much. Thank you. So after 3 years, to be able to stand here and say that 2019 was Packaging's best of the year, I think that's a pretty bold statement. So I hope I'm gonna do justice and explain just why not just me, but we believe in our team, but we are delivering the best performance. And, importantly, we've got the momentum to continue to drive this business forward. So just the headlines, when we look at the business in 2019, across the broad range of business not just financials, commercial, operational, people, all of those metrics are moving in the right direction. And I'll take some time shortly just to take you through the examples of that. In terms of the headline date, Paul already mentioned 2019 we delivered on our commitment of, top loan growth of between 56%, 5.6% Remember, we're in the pharmaceuticals and beauty secondary packaging markets. These markets typically in packaging are growing at between 2 3%. So growth of 5 to 6% is significantly ahead of the market. And converting that not loan growth profitably into margin improvement, again, for the 2nd year running, delivering more than the 200 basis points margin improvement. Now great results financially, I think we have to say still a lot of work to do. At the momentum that we are building and we have been building actually for 3 years is what's giving us confidence that we're on track to deliver that commitment of getting back to industry average margins by the end of 2021, the 8 to 10%. And you gotta reflect, what are the things, the drivers that we are focused on in packaging that is really helping us achieve this turnaround. It simply turns its 3 things. It's about rebuilding and has been about rebuilding Our relationships with our customers, many major pharmaceutical players, many major beauty players, rebuilding those relationships capturing the growth as a result. It's about focusing on operational excellence, making sure we're doing the basics of quality and service, and responsiveness for doing them exceptionally well and driving safe cost savings and efficiency through our 24 manufacturing folks. And last but by no means least, it's about making sure we reengage with our people who has become quite disenfranchised as I came into the business in 2017, quite disenfranchised by the difficult and complex integration from Tom's asking since 2015. So those are the 3 drivers, Tucson customer, operational excellence, and, people. Let me take a few minutes just to add some color. As to why I believe we're moving in the right direction on all three. Let's start with the customer. As I mentioned, many of our customers, major, global, pharmacies, human beauty, organizations, What do they want? They want strong, capable, reliable suppliers that are able to service their demands until responsive to their demands wherever in the world they're operating. What we've been doing, actually, even since 2017, As soon as I came in, I've spent a long time listening to some of our customers. I can tell you the meetings we had back in 2017 falls in with me and many of them, they were far from comfortable, but they were telling us a very clear message. Look, we do want etcetera. We do want you to be a good supplier to us, but right now, you're not. You need to fix your basics. If you can do that, You can grow. So we, of course, we've been fixing the basics underneath the stability and indicating our quality and service rights. I'll talk about that in a minute. And we also wanted to put in place key account management. Does that mean it's about putting cross functional teams in front of our customers to really understand across supply chain, finance, procurement, technical operations. What are the needs of the customer. What is it they want from their suppliers? And how can we, as a central packaging, respond To those needs by identifying a few key projects that we will then work on collaboratively with our customers. And many of those projects relate to the to the 2nd key team, which has been around investing in our design hub capability. It's our innovation, our process, and product development center, where we're taking those customer needs and converting them. For example, developing tamper evident labels to help our customers on falsified medicines directives, or, for example, helping our customers on how they generate and produce artwork. And finally, it can be things like going to customer sites and helping our customers make packaging. Our packaging run more efficiently on their packing lines. These are examples, real examples, of listening to customer needs, translating them through our capability, which we've been investing in into real tangible results. So this focus on listening to the customer, understanding the customer, translating that into real tangible value added, delivery of projects is a key thing that we believe is part of our success. Why are we able to grow faster than the market. And, certainly, that success is something we believe as momentum, now that it's in place we continue to drive those key things forward. Turning to operational excellence, again, from a customer perspective, what is it that they want? They want great quality. Oh, we've been measuring quality weekly, at every site, ever since the beginning of 2017, having a weekly review of quality performance, understanding where it's not meeting expectations, what are the actions that we need to resolve? This is a big focus. You remember, we're talking about 24 manufacturing room sites, all of which are are being switched on on a weekly basis for quality service. So By doing that process, rigorously, following up on quality, identifying root cause of quality issues, implementing corrective actions, We have been able to improve our quality by almost 50% in the last 3 years, and we'll see a slide later. In terms of agility and service, Our reputation actually is a responsive supplier. To give you a statistic, Last year, in 2019, we supported our customers with more than 500 new product launches. Now what does that mean? It means very often we get the artwork delivered to our sites on a Friday. The approval tends to come from the regulators on a Friday afternoon. And by Monday, we're trying to deliver product to our customers so that they can pack or get it into their supply chains. And, ultimately, whether it's to a consumer or a patient, get that product into the market to help consumer and patients. So product launches and response effectiveness and agility is a real key theme and a key value driver for our customers. And we're we're very good at it, and we put it in reputation. And on the day to day side of delivery, our on time installed performance improved again last year, 96.6% across 24 manufacturing sites. Actually, many of our sites are delivering 98% week in week out. That's world class. Service performance. So great service, great agility, great phone quality, key parts of helping drive our operational excellence, the last point, how do we make sure we drive efficiency from our assets? If in this case, the the chart is showing you the improvements you're messaging treatment that we made in our America's, operations during 2019. But, really, this is a program that we put in place back in 2017, you can see we invest for training our people over 600 of our employees. That's around 20% of our employees have been trained in lean techniques, how to help get more out of our existing assets. And some fantastic results, just I just picked one example in Greensboro, which is a literature site in the US. Team put together after this training, to shop floor employees supported by continuous and proven experts. Over the course of the year, improve the change over time of the main press by 10 minutes. 10 minutes doesn't sound a lot. 10 minutes when you're changing over 6, 8, 10 times a day. That's an hour, an hour a half to be able to produce more products and with the same aspect, the same cost base. That's an example of driving efficiency, and we're doing that at 84 manufacturer sites. So, again, it's not something that's new specifically for 2019, focus on quality, based on service on the 21st and driving efficiency that you can see the momentum that is building and we're gaining, really gaining momentum. I'm currently in Latin. I know these leads on the people side. When I came in in 2017, it was evident that we need to reenergize, the leadership team. You can see the certificate more than 50% of the senior leadership team in packaging are new. Compliments the talents that already existed in our packaging team. For the, for example, the commercial directors in both Europe and, the Americas, highly experienced packaging and pharmaceutical packaging individuals. They know the customers. They know the markets. They know our products very quick. To boost the capability and the, relationship with the customer. So really bringing together and building a really high forming capable to your leadership team. I'm talking to engagement, and then Paul talks, in least a lot about engagement, really value, making essential sites better places to work. We're really proud in packaging every year we've been improving our engagement score. So that's just the number. What's it's the home number is listening to our employees through the survey, identifying 3 or 4 actions at every site that we take together with those employees to make those sites read offices better places to work and then delivering on those actions. You said we did. And by doing that, we are is proving and it's tangible when I go to town halls, when I go to town halls, it's tangible. The amount of engagement and get from our employees. They're positive. They're motivated. They want to learn. They want to drive this business forward. And finally, on health and safety, We all, in the center, believe that one accident is 1, 2, many. We all need to go home safe. What's really encouraging are the thousands of observations that our employees are making of their environment to help stop an accident before it happens. The hundreds of pride and events, improvement events to make where workplaces safer. And as a result of that, again, in 2019, we improved our safety performance. So still, ultimately, but keeping people safe, making sure that we're engaged, and making sure that we invest and have the right capable skills. Key part of how we're driving this improvement in the business. Highlight for me last year and for all of us in the packaging team was the acquisition of Nesceta, fantastic business. Great, great business to bring in to the packaging family. Based in Spain, it gives us the market leading position in the Spanish Market And Important European Pharmaceutical Market. It brings with it value added capability, serialization, digital capability, This is stuff that our customers demand, not just in state, but we can use that capability elsewhere in the network. And the fantastic and highly talented management and workforce team to complement our existing talents. So, really, I mean, it hit the sweet spot on so many angles, and you can see the picture. The only slight down point for a man United plan was having to go to round trip and spend the 1st day there, welcoming the NetScats team to our family and really sharing between each other what we're trying to achieve. But it's fantastic, K. And you can see the picture there. Again, a great example of starting an integration of in the right way and learning some of the methods perhaps from the past. So lots, I hope I've given a flavor and some examples of what underpins the turnaround and the success that we're driving in packaging, it's about the focus on our customers, putting them at the heart of our business. It's about continuing to drive the operational excellence, and it's about really engaging with our people. If we continue to do those 3 things right, they're still a ways away from our target, but we're confident we've got the momentum. We're doing the right things. And we're gonna get back to that 8 to 10% margin. Thank you. I'll hand over to Neil. Thank you. Morning, ladies and gentlemen. Glad to be here. But before we get down to numbers for 2019, let me take a moment to reflect a 18 year for you. Thanks, sir. As Torres already mentioned, we had, you know, high volume of various corporate and business development activities. As a result, our structure was substantially simplified, And, and look, as a result of activities, we also, last year, you would recall, with this old, just over a 100,000,000 of Annualized revenues are $15,000,000 of annualized trading profit, which make it somehow difficult when you do year on year comparisons. Start and mark along that backdrop, I would say, I'm really pleased with the robot. Profit delivery, and I'm working with a strong balance sheet position. And she looks like we delivered 4 underlying top line growth and underlying bottom line growth. And our margin was 9% 20 bps improvement. Strong cash conversion at 82%. We have invested in networking capital supported in growth. Supporting private litigation and also supporting the, the, outsourcing deal in, in future. So we announced half year. Strong has strong cash at 82%. Now moving down to balance sheet net debt two times, after IFRS 16. I will recently make a brief announcement for the US dollar 80 I need to look at it. Paul has already mentioned dividend intent at 20.7p. We also have steady improvement on goods. Now among all the positive, It was really disappointing to see the things in market compliance failures in our futures business. I need title on the group. It's immaterial, and I will provide more details on my section a bit later. Turning on to income statement. At the summary level, underlying, revenue grew by 1.5% and 20 6 margin expansion. Adjusted EGS at 20.3 p, a reduction of just under 10% of constant ForEx. The reduction was largely driven by the disposal activities we mentioned. Now both Paul and Ian have already mentioned, the performance acquisition. So I just took up a few Salencing from my perspective, clearly a strong performance in packaging, 5.6% underlying growth, Thanks to those measures and investors outlined in terms of promotional, operational, and people. And despite the micro, economic uncertainty and also the few PMI performance, a component delivered a really good helpline performance and thanks much to the pricing management. On Futures, our revenue was a moderate decline poor has already mentioned, I just want to highlight an implemented, a very strict control and compliance framework, delay to certain orders and now we show from certain customer relationships had a negative impact. On the top line growth. So to talk to 4th point, we deliver it to an overall 1.5% growth Also, I just want to mention, both acquisitions performed well in the year. Now turning on to operating profit by division, underlying operating profit grew by 2% with the 9% margin. This has delivered with the 200 gig margin inspection, integrity, as expected. And 21 per 21.3 percent resilient margin in Components helped by pricing management offsetting market volume decline. And also, we have seen some margin dilution from the integration of the re leases and also the innovative component acquisition. A flat IT margin for Futures, Thanks for further operations excellence in the supplement and offsetting some of the Tier test margin dilution. I want to point it out to you. The central services cost was just under 29,000,000. This was a 1,000,000 letter. Then my guidance that I spoke about last August, you would recall that we had highlighted this about 2,500,000 central cost and allocate it as a result of specialist component business being resolved. The true like for like increase from the central cost from 2018 to 2019 was largely driven are higher IT Depreciation costs, following the investment in cyber and also IT infrastructure. We have put in some new and upgraded skills that in the center to support the business. Paul mentioned, we will start rolling out our DTR program in the 2nd half or 5th year. We are commencing a review on our G and A cost. Now I am expecting our central services cost in 2020 to report me in line with 2019. So moving on to the bottom part of the income statement, financing card £14,500,000, about 3,600,000 higher than 2018. Now the big reason there was There's 2,000,000 on IFRS 16 change, and the remainder is because of higher GDP GBT denominated debt. Now I'm expecting this number to be forklift flat or with moderate decline in 2020. Impacted tax rate 19.9 percent certainly in the region of what we've guided. For 2020, we expect it to be 19% or 20%. We're watching the, the government budget closely. A minority interest in 2019 was enacted a full year of our India daily and a quarter of our Dubai daily. Now coming to 2020, it will reflect 2 JVs, not to buy JV, but the timing of JV, as Paul mentioned. So we expect to consolidate our China's JV or it will impact in the multi interest line. Now I have talked about adjusted P and L let me, at the moment, on our exceptional cost. In 2020, we reported except, sorry, in 2019, we reported a fentanyl claim of 15,000,000 or the £15,000,000. And largely, that's driven by very successful divestments we've implemented during the year, £15,900,000. Now as I mentioned in the interim, the tax tax associated with this was high because the tax base is slower than the accounting base, The benefit was realized in previous years. Sales were spent a couple £1,000,000 on other restructuring costs and some integration costs. And if you add everything else on the page, It's a credit of £1,600,000. 9,000,000 of credit for certain property provisions released. Was offset by certain parts recognized by the group in relation to the men I mentioned investigation in the sanction compliance area. In the future division. Now our commitment to ensure a comprehensive review of the past business conduct and full cooperation with US government is reflected on the number on the page. That we spend 3,600,000 tons during the investigation and and providing remedial actions. Now as a result of the investigation, we have made a voluntary disclosure to the office for an asset control. And our discussions with U. S. Government continue. Advisers. We have recognized an estimated 2,300,000 financial penalties in our book. You have reviewed our balance sheet carefully. I mean, you have 1,600,000 specific items from the balance sheet. Now the time and money will send assistance. In terms of enhancing the processes and conducting the review. This is the response has been robust has been a comp a very comprehensive compliance information program. And it is designed to ensure future business safety. A set change has started And I'm confident confident that our compliance culture will continue to strengthen. Now I colored P and L both adjusted and exceptional. Now moving on to cash flow. I just paid in the beginning, 82% cash conversion. But few factors are the ones who draw your attention to. The operating cash flow of of £72,000,000. Beyond the aforementioned disposal effect, We also, invested working capital security in top line growth. We also invested to finish through reporting and project mitigation. We also have, 7,000,000 extra CapEx supporting the first outsourcing deal in filters. Which actually make our CapEx slightly overall guidance for 55 minutes this year. We are preparing interest and tax our free cash flow was 47 £41,000,000. Now I'm speaking to my statement of some balance sheet position at the beginning. Net debt ratio was two times after IFRS 16. And let that reduce by about 8 and a half during the year. Our free cash flow in 2019, we recognize temporarily did not cover the full amount of fees on payment within the year. Let me repeat the reason. It was a disposal. It was 4 disposals happen in the year because we might use annualized basis. That's 15 minutes waiting profit. And networking capital support top line growth of packaging, supporting, finished goods and components, through, Brexit mitigation, So and also the, the settlement extra, investment in, intuitive outsourcing deal. Now we, sir, continue to drive for growth agenda, and we will continue to deliver the 5% top line growth and 200 to 250 bps margin extension, we are expecting to rebuild the government cover from the P and L perspective, and also we're expecting to to get CO2, I was just not, you know, one hunt has cover by the end of this year. So what's everything together, Royce, completely pleasing to see in the last three years, Royce has February recording and adjusted basis. I am confident that we have the right backup to further improve this measure on the steady basis. Why am I saying that? And the teeth and the pins are all very rigorous capital allocation policy. And lately, we established an investment committee process try to approve all major CapEx and across group. Let me just summarize my my section here. Overall, I would say it has been a very active year for each center. And during which, All businesses have taken some big steps forward. The group has maintained a strong financial position, and we look forward to delivering further progress this year. Now with that, I'll hand you back to Paul to discuss further and growth agenda. Thank you very much. If, as a Manchester United support for your self role and attention to the signatures, I think you've missed something. You don't look at the table. The growth has to be you have to earn the right to grow, and you have to get the basic Otherwise, all you do is you increase the size of the cataclysm when everything online. So they took that stability strategy and growth. I'm probably gonna retire honorably these slides, henceforth because as it's demonstrated, I think now we're world class and then it's both dimensionalizing world class through through death by powerpoint is probably not a a a productive strategy to go in your head. So it's achievable me very briefly. So we've had over the last 2 years of 50% reduction in both the number and the intensity of lost time incident is answered. That's still 32 to many colleges, so much better. Services is critical And you can see there, every division has progressed, 96.6.40 packaging, 94.382. And 98 and a half in in filters. We won't take our eye off it. We're actually active as a measure now is is not the key one. It's from the lead times. So we now look to shrink the lead times whilst holding the out of stable. Quality. This is the incident rate, so it's good that it's going down. You can see components as halved, filters as which is manufactured with 3 and packaging is halved in in 3 years. One of the self inflicted goals that I talked about in in February 2017 was another investment in in IT. There are two aspects to that. It's the kind of plumbing with the basics. Does our IT prevent our factories working or not? And then there's if you like, you value added applications. In the former category, can we just do it? You can see there That's a measure is the major incident. A major incident is an IT issue that closes down a factory or a main function for an hour or more. When you can see in 2 years, that's come down by 75%. So there is a an impact on on on the role but also with the cost benefit of that. Employee engagement, I'm delighted to say we are now probably 6 5th percentile. We still got a long way to go, but we were probably about 6.5th percentile in 2016. So huge, huge, progress there. I've seen who is in the audience, came in as prepaid shop, didn't have brought a wealth of experience, and skill and has really started getting an outstanding, function how we are managing things now, and you can see that on the bottom right, is the 7 stage employee life cycle from attracting all the way through to people who are losing on. Mary Riley, has been appointed as a board employee champion and has been fantastic and jealous is getting out, taking the pulse of our people and really also having that independent feel to the board as to what our people are really thinking and sustain the business. I'll talk about that in a minute. It would be fair to say that we are halfway through developing that strategy and those measures And I'm I'm hopeful that, at the time of the interims or maybe slightly later, we'll be able to be very much more precise. There is a a new sustainability committee that co ordinates, at the top of the pyramid all of our activities in in ESG. It is not only the right thing to do, but it is the right thing to do. We're very much linking, our initiatives in four areas on the bottom right chart there. To those various, UN Sustainable Development Goals About Responsible Resources And Energy And Climate Sector Environmental Aspect people and community and then, responsible supply chain. We we basically process lots and lots of materials, to from a vast range of global suppliers, and we supply them to 100 of 1000 of global customers and increasingly focusing on the responsibility of that, such as, for instance, the development of environmentally responsible cigarette filters through to potential recycling schemes for is like one off capturing plugs in the auto industry. Just two examples of work that we are doing in this area. And then the other key enabler, and please just focus on the left hand side what are the benefits of this business program business process redesign program, as if you recall, as it is a failure program, starting with components and then financing purchasing from a functional point of view. It is we are succeeding at the moment in of our systems rather than with the assistance of our systems. For a company of our sites to have 40 flavors of DRP is bonkers with a capital b. So That is a a a critical probably the critical self inflicted goal that we have still, to address. What it will do as well and hope that I've been able to, kind of cover that and get me in touch with other benefits as well. Is enable the strategy. So if we acquire, when we acquire, businesses and components of package, we're being able to slot them in. If we want to make material improvement now on net working capital, it's about joining up and and leaning and having ability to a single ERP system to treat our global network for instance packaging as a virtual battery. So I think how do we how we get to the next stage of asset utilization and drive up that ROIC other than profit improvement, it's all about, leaning and redesigning our business model. If we look longer, further ahead, take each of them in, in turn, components, These were the strategic milestones that we set ourselves. I've talked about the digital platform rollout a self assessment there of various milestones and where we think that we are. What is important for 2020? I talked about this There's vital must win across selling continuing to gain market share. If you recall the formula that I said for this business, is industrial production output plus 4%, and that's 2 to 3% from price 1 to 2% from market share gain. Now as you can see, the improved pricing discipline, which is led by Amir, who's now moved and joined the dark side of the center with us here, actually delivered well in in that place. What is also important is to continue to both increase the functionality and the coverage of the new website. So for me, I'm the real sucker for that. People who bought this also buy this Amazon type functionality. That's you'll have the smartest way to facilitate the encouraged cross selling. That will be in in the next wave when we go to version 2.0. If you take filters, again, pretty much hitting all the team's strategic milestones, what are the challenges there? Really build on this this china joint venture. The opportunity to to grow our business in China budget for 5 to 10 I think is very material. Let's look at the sizable market. Look at the the inside track we have through endorsement of ICNTC and and these partnerships, and that 4% penetration compared to the midteens penetration in the rest of the world of special products. Outsourcing opportunities, clearly, we've we've landed a second one tomorrow, and the team has landed the second one this week and then to continue to develop these next generation products. Ian and the teams, he's talked a lot about those what are the what are the key things, operational agility, we are so so different from a standard, so you can tune into the packaging company. Their back size might be a $1,000,000 in the tens of thousands. It's all about, high service levels, high responsiveness, and that customer dial up to solve problems. So give me one example. The most regular, query we have at the moment in our design hub, how do you design plastic out and how do you design cards in? It's very much about focusing on the recyclability hitherto. It's been how do you make it cheaper using that? But I think in this first way, that's that's the major request we're getting at the moment. And that's fantastic. So they're doing the right thing and also benefiting us, and we are pretty much unique in our ability to do that. Maybe there's one other company in the world that could And then it's about really using that key account management structure and design hub to continue this 5, 6, 7% upgrade. So if I look ahead, notwithstanding the macro context, I think that our foundations are increasingly strong. You look. We do have an even stronger hand of guards than we had I took over in 2017. We've given examples now with our customer franchise. People, intentions, would not give us outsourcing bills, attend the living system, didn't trust us implicitly. I've hopefully shown you that we are cast leading in every businessman operationally, you've seen examples of employee engagement and an enhanced pipeline. This is very much, a basis Fosterville is now, a kind of 5 legged stool, if you can have a 5 legged stool, on on which we will be building. Yes. Of course. There is a macro, uncertainty at the moment, which has been exacerbated by COVID nineteen. But please recall the fact that effectively, cigarettes and medicine are broadly non sick So, yes, we we do see that volatility, although we proved our ability to hold in a in a tough, market and components. So we expect strategic financial and operational progress. We cannot do anything particularly by COVID 19 or industrial production. But what we can do is pull that wealth of levers that are in our control. So, again, I won't repeat all of that, but three messages We are a very, very different, more focused, set of global divisions. Claims divisions have done all the ways that have the strategies, have the people have the customer franchise for them to grow and underlying the robust performance, which net or maybe maybe margin exceeded expectations. With that, I will take questions, the only 2 to 3 subjects of Manchester United and COVID 19. Anything else I will happily, James, Good morning. Good morning. I've got 3 all on the filters as it happens. Firstly, can you give us a little bit more background on the compliance issue that that that Lily talked about and, how how it was identified and whether there is a risk of further similar compliance issues being being uncovered, over the course of time. Secondly, on the outsourcing, contract that you've, that you've trailed today to you that you signed this month, How big is that? And, are there any contracts, investment requirements, upfront for that contract? And then thirdly, just just one sec. Appreciate this is this is one of the 2 projects. So thank you for on the on the side. Yeah. What's your name? If you're a shadow person, please press 1. Because I think you said that you would anticipate, producing for a shipment towards the end of 2020 book. Excited with with with the COVID 19 situation, what what is the likelihood that that gets delayed in by how long? Let me do those in reverse then. If if the situation, we are continuing to do all of the development work over China. Bank venture. Now if you said, what do I think? Assuming things in the next 2, 3 months stabilized, I reckon you're looking at this coming operational in the first quarter or so of 2021. So that's about 3 month delay. To be my best guess, but who knows what's gonna happen in in with with COVID nineteen? The the second outsourcing deal is at least 3 years in order of magnitude is 30. 30 off living. So it's totally the same per annum. I mean, it's a minimum of 3 years. And there is no CapEx required. And then the the nature, I think I'm not sure whether that's subducees, but I've got John and I'll I'll have a go and you just tell me like that if I'm saying anything too much. Yeah. It relates to, as we say, the filters. And in particular, as we said, it's published on the Middle East. Having said that, James, what we have done is scrub and review every single possible area of similar risk whether within that division or in other in other divisions in in kind of theoretical capitalist territories and we're very comfortable that there is nothing else of that nature. We have put a a a thorough program, and I reckon that it is we are as if you like, sensitize and with rigorous compliance processes and review process and approval process as it's almost humanly possible to do. So could I say nothing would ever happen ever again? No. But would I say that it is a cleaner than clean business? Yes. The, the nature of really is indicating 2 categories, There were 2 individuals who without reasons of personal gain is we believe that if you'd like to act it in a inappropriate manner. And secondly, there was in a limited number of which is a breakdown in the review processes that allowed If you like, the breach of the the ethics, which we, the ethical standards and legal standards that we expect Is that Okay. Charles. Just a few questions on the components. You talked about NPS exceeding expectations. Can you give us a bit of color to when is that coming in terms of private sales or or margins or operation improvement? Secondly, on I'm stepping on, pricing. You've got 2 to 3 percent of price improvement. We're already at the day, and I think we've already put the, knowledge in into the process of schedule to ensure that comes through this year. And then you commented Mingbo being up and running next week. I thought, what's that actually means matters for productive capacity with all your people back? And what sort of specific orders for, last time? It will be at 95%. Capacity. There are 9 individuals who are still stuck in Wuhan or whatever. We do we do track on a regular basis, the well-being and status of all of our individuals, and, like, say, everybody is is is safe and accounted for, and no deals developed anything. So, yes, we will be at 95% of it in fact. 42 on Monday. The microplastics, it's effectively is at the level now in terms of the margin. Haven't been half that level of the position. And that's the 3rd question also. Pricing. The reference I made, was to 2019 but we are confident in the 2020 for, for that pattern as well. And then just lastly on the rollout of the online platforms. It's going to be pulled up to 70% of Yep. So I can give you how quickly you can give it up to a 100? We won't focus on getting it up to a 100. We'll increase it in 2 or 3 other key territories, and then we will focus on doing the option 2. Because there's actually more leverage in in in sticking at 85% and increasing the efficacy of the 85% rather than taking it to some of our deeper c dot smaller markets. Thank you. Welcome. Tom Sykes from Deutsche Bank. One question, just following on from the answer you gave on the the lack of traffic in the outsourcing deal that you announced. So you may be able to sort of help us bridge to a a better cash convention. So what you when you look at the growth opportunities that you have, how capital intensive do you think those are? You're up to running at quite a high level of CapEx now. So just how we should think about coverage to the better cash conversion. Yeah. I think, clearly, we've had We had a Brexit stock build and the outsourcing that's probably 10,000,000 or so of nonrecurring cash, Tom. We will have a profit growth now, and then we did show quite a lot now you're beginning to see annualized acquisitions and and underlying profit rate. I'm I'm very confident. With the one obvious. Yeah. CapEx, but if we think that that cash conversion is is primacy, then we can continue to grow these strategies with a with a marginally reduced CapEx and for the BPO, we'll have a a kind of peak expenditure in the next year or so, and then as we deploy It becomes less capital intensive. I think so. We'll do try and do things like work on our our cash tax bill, etcetera. So there's there's most believers if the world obviously goes really, really bearish. Then we will we will act appropriately. We have levers. We can be more draconian. What we do want to do, haven't got the the strategies and the building that's in place is is really to to compromise that. Plus, in terms of working capital, we have been supporting in in terms of, you know, during that situation, expenses, the product ranges, and the customer base. Thank you very much. And then thank you very much for the banking presentation as well. And just one assumes you're not at 4% margin in that single facilities, mostly SKUs. You've got 24 facilities. So maybe it's a little bit of color about where you know, how skewed is the incremental improvement going to be, you know, other particular facilities, particular end markets, a customer that you're addressing, which you're gonna make a disproportionate impact to that incremental change in the packaging business. The key the key drivers of the recovery is the is the chart that that Ian showed, which was the OE. So it's how much we follow-up. Of factors. We are we do have variations in in OE, but we still have for the runway over the next 2 years, we have we have scope to improve across all of them. There are some sites that are probably a dual kind of review of, We'll continue with you in doing kind of customer margin because if you recall, you said before that there were some customers at a gross margin level, kind of making up into or even marginally negative because we post contracts historically with no problems. And so, where the put the true cost of manufacturer's time. So I think if you cross the board, if if Ian gets that 65 up to 68 or something like that, that would be And I go into meetings, let's say, roughly 2 thirds of the margin improvement, transfer and operational gearing, something like that. Obviously, you're you're comfortable with the the assets, whichever the lower level of utilization of servicing end markets, which are growing enough and have enough market share gain for you to be able to get that. Oh, absolutely. Absolutely. And the key statistic is we deal with 19 of the top 20 pharma medical products companies in the world, we have a 4% market share We could continue that road and not get another customer. That means we're not gonna try and get new smaller customers, share of wallet facing that, placing a story to to components with cross selling issue. I I would trade Sherry Wallet for any new customer any day. So yeah. Thank you. Anybody else? So you always come up for a second. Obviously, you had a very busy year last year. You might have a good time on the handsets. Have you got some, a pipeline of acquisitions to keep you busy this year. And, and secondly, on packaging, you talked about insuring the parts of being an area of interest where where are your thoughts touching on that? Yep. And the answer is yes. We do have discussions going on, and the team with the divisional heads and the trainer kind of using the it doesn't really feel like a quite functioning object at this moment, but using that quite time to, to deal with, so, Scott, will be Scott Force. It will be spending a week or 2 around if the internal competency in April, so, yes, we are making progress. If I if I take what's important in the institution, go to the I think the 4 things that says 3 main changes plus I really do want us to see make progress in environmentally responsible offers. Tackaging, yes, we might contemplate something, but we're an engineer with what to do, making necessary work. So I I wouldn't see anything until later in the yesterday, I'm having discussions in in India for components of China for packaging. It's it's Indian. I'm I'm hopeful that we could do, not least, because, our customers want it. The customer over that with 1 or 2 of the companies that we have is a very significant, very significant. And components, yes, but I'd rather, like, if they're gonna burn calories, they they turn them on to really land in the business process redesign, pulling out the website focusing on cross selling and Apple market share gains. So, yes, we are talking in 3 different continents to to potential, new members of the family, shall we say, but we've country to to your perceptions, which we will cover what to do on the date of. If you see me on the beach, or whatever at 11 AM you can and call us. Okay. Well, thank you very much. Indeed, should we we we normally go into some discussion today? To to to cover people at the back, check if there's anything inside the space. Over to know who's waving. So okay. For those of you, I'm sorry for the the tea and coffee, and we'll be here answering any questions. Thank you.