Earnings Call: H1 2021

Aug 25, 2021

Good morning, ladies and gentlemen, and welcome to the live Q and A Call for Grafton Group Half Year Results for the 6 months to 30th June 2021. You will be shortly able to ask questions by pressing star 1 on your telephone keypad. But for now, I would like to hand the meeting over to the Chief Executive for Gavin Slark. Please go ahead, sir. Good morning, everybody. This is Gavin Slark, and I'm joined Today by David Arnold. First of all, if I can just apologize for the slightly tardy start to this. This was just down to a technical issue That was beyond our control. But if anybody does know remember how to put 20p into a payphone, that'd be quite helpful to know going forward. Just apologize for the slightly late start. Obviously, this is all about Q and A. This isn't about going through the presentation. As you will all have seen, the presentation went live at 7 o'clock this morning. But just to reiterate the point from myself and David, In terms of operationally, the first half of the year has gone incredibly well. Financially, really good result, Great cash generation, great operating margin, strong return on capital employed, putting the business in a great shape financially And strategically, been really important period for us, 1 with the divestment of the traditional GB Merchant Business And secondly, with the acquisition of IKH in Finland that we completed on July 1. So hopefully, quite a bit to get through. We've got about an hour before we need to move on to other things at an absolute outside. And at that point, we'll move straight into the Q and A because I can see we have got some questions Operator, if you can now take it to questions, please. Certainly. Our first question this morning comes from Mr. Dave O'Brien from Goodbody. Please go ahead. Good morning, guys. Thanks for taking my questions. A few for me, please. If I could start on Gross margins for the first half, it's a very strong performance. I just wonder, could you give us a little bit more color on the drivers there? And how should we think about that gross Margin going forward. And as an extension to that, longer term, not necessarily just into the second half, but how should we think about The operating leverage specifically for U. K. Distribution now given the kind of the reshaping of that business? And then with regard to kind of activity levels, There seems to be an element of conservatism in the guidance. I wonder in terms of the evolution of What product is being sold or ticket sizes across the business? Is there anything in recent trends that suggest change in behavior in your customer base or underlying And then finally, a little bit more longer term, how do you think about the U. K. ORMI cycle into 2022 and beyond? Yes. Good morning, David. Let me pick up on the gross margin in the first half to start off with. So It was an exceptionally strong performance from a gross margin perspective in the 1st 6 months of the year. In fact, If I look at the first half of twenty nineteen as a benchmark, which I think is probably a better place to start rather than the first half of last year, which is obviously Distorted by the pandemic and actually some of the businesses being shut for a period which weighed down on our gross Margins, so if we go back to the first half of twenty nineteen, compare that to the first half of twenty twenty one, then what we actually saw was that the group's Gross margin increased by around about 200 basis points. Now of that 200 basis points, I think There are probably 4 important components, and they probably each account for sort of roughly equal amounts behind that 200 basis points increase. There's about 50 basis points of that increase, which is attributable just to the mix of businesses. And when we look at the first half of the year, Those the Graston businesses, which had the strongest gross margin, in general, grew the strongest in the first half of the year. So there was a weighting On proportion of business, not only that, of course, we've got the acquisition of Stairbox, which was a relatively modest contribution from an profit Effective in terms of the first half, but nevertheless, it's a high gross margin business. So we had a business mix effect and that accounted for about 50 basis points. If we then look at the sort of the other three elements for that gross margin uplift, I think the key one is that Over the last few years, the distribution businesses on the ongoing activities have worked really hard From a systems perspective and a price book management perspective to improve gross margin. And Our expectation is that, that improvement and the work that's been done, the hard work that's been done really at an individual branch in store level, No, that should prove quite sticky going forward. So I think that's an important element. The other two elements That's behind that gross margin improvement. I think the first is, as we'll all be aware, we've really been through a quite unprecedented period of price inflation. And that benefited us in the first half, benefited us because we've executed really well Pushing through those price increases that we've been on the receiving end of into the So there's an element around inflation. There's an element around stock gains that we've seen in there as well. But in general, We've seen those are realized stock gains. And so that's actually That's an important element. And then I think the final element is when you look across those distribution businesses that actually each of the businesses have had a favorable Customer mix element. So we've seen very strong growth in the first half around private residential RMI and the spend associated with that. So we've had a much higher proportion of customers who are buying in cash and collecting products. Now as we start to move forward and we see the increase in newbuild activity, whether that's house building or commercial, which, of course, has been relatively subdued. There'll be more delivered products, and so there'll be some gross margin dilution, I think, associated with that. So it has been a really successful first half on gross margin. I think those are the components. I think we've looked to hang on to the elements system wise And management wise, that we've gained but there'll be some dilution going forward as we see That customer mix change and as we see inflation start to moderate. I think in terms of trends, David, I think obviously Product mix is quite an interesting one to look at, but it's also about geography. And obviously, if you look at our continuing UK business, which in terms of distribution is predominantly now Cellco and Leland SDM in terms of the U. K. And the RMI market is the key driver there. Probably the biggest thing that we've seen has been geographic as opposed to That has been outside of London has performed more strongly in the first half of the year rather than inside of London. But in recent weeks, we've started to see activity levels significantly rising within that kind of Greater London area. So I think in terms of The overall trend, the RMI market, we're still seeing this very strong. We haven't seen significant movement in different product sectors, We are now starting to see the Southeast of the UK coming through and being more strong than it was in the first half of the year. I think if you look at the Underlying trends in terms of RMI going forward in the UK, the fact that the Southeast is getting stronger is a positive for us, very strong Penetration there with Selco very strong in terms of Laeland SDM, and we would anticipate that the underlying RMI trends in the UK will Stay strong for the foreseeable future. That's brilliant. Thanks very much. Thank you. Our next question comes from Will Jones from Redburn. Please go ahead. 3, if I could, please. The first is just picking up on that commentary around gross margin. I Noted that competition or the competitive backdrop wasn't really cited as one factor for the gross margin increase. Perhaps you could just reflect And in the U. K. Particularly, how you see that dynamic? Obviously, there's lots going on in the industry at the moment with various business ownership changes. So an update there would be great, please. The second, maybe just around Ireland. I think in or Island Merchanting. I think in July, you thought that Potentially, the 2 year like for like might slow a little bit in H2 versus H1 at the moment. It's obviously running usefully ahead of that. It's still, I think, 20% plus in July August. So perhaps you could just give us an update there in terms of the underlying market. And again, if there's any change to how you see H2 playing out And perhaps just a sub question with an island, but do at some point, do you need to consider the large openings there? Or is there enough capacity in the existing business To satisfy growth. And then perhaps just over in the U. K. Again on sellco, can you just give us an update on the medium term store rollout Does that pass, I think, to 90 to 100 branches that you've talked about? Is that still the view? And any update on Macca's geography store size on route? Thank you. Guys, apparently, we're having a sound issue. Can you hear us now? Yes. Not in here. Carry on. Okay. Sorry about that. I'm sorry, Will. I might need you to sort of just go back over some of those Q and As. But I I think the first one was about gross margin and was around the sort of competitive dynamics of the market and that I haven't mentioned that in terms of the factor in the first half. I think we'll probably all be very familiar if we go back a few years that we've been through periods where the gross margin It has been under pressure because of the competitive nature of the market. And I think we talked about it probably over the last Couple of presentations that actually at the present time the strength of underlying demand in the market to some extent product shortages I think has meant that the competitive dynamic has been from a customer perspective much more around availability rather than one where they're particularly sensitive to price. How do we think that that's going to continue to evolve? Well, fundamentally, that will be It's driven by that underlying demand backdrop. We think that's good. Across the geographies, we think that's a very positive position at the moment. We think supply challenges are probably likely to continue at least in the short term. So we would envisage that that Competitive dynamic will have less of a bearing on gross margin than the other factors which I talked about. You asked about Irish merchanting and you said that the like for likes there are sort of running usefully ahead And I would absolutely agree. I think once the Irish construction market emerged from its lockdown back in April, we saw a very Strong recovery in May June, and that has continued into July August. So we're really very encouraged by the prospects of the market. New house build has recovered and come back very strongly, which is a real positive. And we know that That continues to lag behind where underlying demand sits. So both on an RMI and a new construction We think the market is very positive there. We obviously bought ProLine in the first half of this year. I think that adds An additional dimension in terms of growth of the Chadwick's business. And I think it's probably about Adding on and broadening our capabilities in the construction market more than it is about new branch openings. I think when you look at white space on the map and our coverage that we've got, Chadwick's is absolutely the market leader from a geographic coverage perspective. There aren't that many white spaces. There are a few, but not that many white spaces. So I think it's I think the growth from Chadwick is around Outperforming in the current market, looking at broadening its offering, yes, potentially some bolt on acquisitions Or a new organic opening of branches, but probably that bit is more at the edges than I think the out Performance in the market and the broadening of its product offering. You asked about Cellco in the medium term. Yes. I think Cellco is a really interesting one now, Will as well, because obviously it is the predominant U. K. Distribution business that we have following the divestment of that traditional sort of build base type business. So As we sit here today, we have 70 Cellco stores. Liverpool opened earlier this year. We'll open up in Canning Town in London and Rochester and Kent before the end of the year. And I think with where we sit now with the branch numbers around about 70, I would say medium term could definitely see a road map towards Selco being 100 stores in the We've learned a lot over recent years about operating outside of London with some very successful sites now in different parts of the UK, And it's a very proactive development plan, but I think Selco sitting at 70 today, we can definitely see At least another 30 stores going into Selco in the medium term. Great. And I noticed the online share in Selco It continues to hover around 5%. And is that more about giving customer preferences in the way they want to do business? Or is it partly about your offer as well that, I guess, could change anything. No, no. I think it is quite customer driven. I think the other interesting thing is that between 75% 80% of that 5% It's actually click and deliver. So it is about people going online and organizing building materials to be delivered. The actual instance The click and collect is tiny. And I think part of that is also driven, Will, by the fact that the customers have got a lot of confidence that they can go into Selco, As many of you have seen the Cellco stores and the inventory is huge, the inventory is there. So I think it will continue to grow, But I've always thought that a trade business like Cellco will have a lower penetration on digital sales as opposed to pure retail Because of the way that our traders operate, but I think it is very much around the way the customer behavior is. And it is interesting that the vast majority of what we're doing online It's for delivered products and not for collected. Great. Thank you. Thanks, Will. Thank you. Our next question comes from Christian Horst from Numis. Please go ahead. Thank you. Good morning, guys. Three questions from me, if that's okay. First of all, just touching on sort of the obviously, last year, there was lots of conversations around Structural changes perhaps in the industry as a result of COVID. Just sort of any update on that now that demand has clearly Rebounded strongly. Some of those sort of structural changes that accelerated a base stick and are we continuing to see that, do you think, going forward? The second one is just on the Netherlands. I noted that you sort of added a few branches. I'm just wondering how much more there is to go for, Obviously, having done the larger acquisitions there and continuing to acquire branches and take up that white space. And then finally, StairVox, as you've mentioned in the presentation, clearly been a fantastic acquisition and performing very well. I mean to what degree is there an opportunity to perhaps roll out that business model in other jurisdictions? Thank you. Yes. Good questions, Christian. I think in terms of structural changes in relation to COVID, it kind of changes very much by Geography, if you look at the restrictions that we've had in place, they've been different in Ireland to what they have in the UK. And if you look at the Netherlands, they had very few COVID restrictions that directly impacted our business. I think if you look at generally across sort of business, Working from home seems to have been the biggest change. But obviously, in a construction market, working from home is actually quite difficult when you're running builders Merchant branches or DIY stores and how our customers are working in customers' homes. So I think probably the biggest change We've just seen is the way that we communicate. But I think the if you look at what we're doing in terms of digital penetration, we expected that maybe To be a little bit higher than what it has been, it grew last year. As Will said, it's kind of steadied at about 5% in Cellco. So I don't think that we're seeing huge structural changes on the back of COVID in our specific industries. Although obviously, I think that whole area around flexible working and just better communication for our own people has been a critical part of it. In terms of the Dutch business, you're absolutely right. We are more now into bolt ons in the Netherlands than we are about big seismic Acquisitions because we are now the market leader in the field in which we operate. We did a couple of small bolt ons in the first half of this year. There are still more bolt on opportunities that we see going forward in the Netherlands. Some are active conversations now. Some will probably come through more in 'twenty two than the second half of this year, but there are still opportunities for bolt ons within the Netherlands. But of course, a key part of our strategy has been new geographic markets that give us new platforms for growth. When we acquired the Dutch business in 2015, it was turning over about €90,000,000 a year. It's now over €300,000,000 a year And we just needed to find the next opportunities, if you like, to sort of carry on with that growth profile. So The acquisition of IKH in Finland was a key part of that. That business is a great business in Finland today. It already trades into Sweden, Already trades into Estonia. And I think we've been quite open in recent years about our aspiration to get into more European territories And to give us more platforms for growth, and that's still very much part of the plan. And hopefully now, as travel becomes easier, We can actually get back on the sort of acquisition trail and spend more time really getting under the skin of some of those opportunities that we've been looking at in the past 18 months. But I think our aspiration hasn't changed on that front, but neither has our discipline In terms of the way that we deploy capital, we've always been very careful and disciplined about what we bought. That hasn't changed. We'll continue to stay disciplined. We'll continue to look for good businesses in good markets with good growth profiles. Your comment about Stairbox is absolutely right. Alex and the team at Stairbox have done a brilliant job in the 1st 6 months of this year. We've learned a lot about that business. They've learned a lot about being part of Grafton. There may be opportunities to look at other geographies, but we want to make sure, again, that we do things in a very disciplined way And looking at making sure we've got everything nailed in terms of the U. K. And if we take it into a different jurisdiction, Kristen, probably The logical place would be to see what we could do in Ireland where we've already got a really good distribution network. So It is part of the thought process. It is part of the plan. We have only owned that business for 6 months. The guys have done a phenomenal job there In the 1st 6 months of being part of Grafton, but certainly buying Stairbox was about can we make it a better business in the UK than what it was And are there growth opportunities for us? And that's certainly not lost on us. Excellent. Brilliant. Thank you very much. Thank you. Our next question comes from Sam Dindal from Stifel. Please go ahead. Good morning, guys. Three questions from me as well. Firstly, on Irish retail, obviously, an exceptional first half. I just want to And work out where does that normalize to next year in terms of profit if it was €23,000,000 profit business in 'nineteen, obviously, even exceptional growth since then. On operating margins, sort of pre profit, you saw nearly 40% in the first half. I appreciate exceptional volumes. So has that changed your view in terms of Where those margins could be, I think you said before, sort of low double digit was where that you expect to be at the medium term. And then finally on M and A and new platforms, How many would you be comfortable doing a year in terms of management attention? I appreciate the prep was around themselves, but Could you save sort of more than 1 a year? So traditionally, it's been sort of £100,000,000 deal a year. So how do you see that progressing? Thanks. Yes. We'll work our way back at the list, Sam. So in terms of the M and A, look, I think one of the things that we've always been very clear about The businesses do run themselves. And we've got some really, really high quality management teams in the businesses across the group. You look at businesses now like Leland SBM, you look at Selco, you look at Chadwick, you look at Woodies, you look at McBlair and Evans, we've got some great people running those businesses. So I think David and I feel quite Confident that we can devote quite a bit of time of hours to the strategic development and growth of the group. A key criteria In buying IKH was that it came with a really good management team. So, Matti, who's the CEO, has got a great commercial director, business development director, Procurement Director, really, really good people in those businesses. So could we do more than 1 a year? I think we absolutely could. Would we be comfortable doing more than 1 a year? We absolutely would, but only if they hit those quality thresholds. And having a good quality management team It's part of that quality threshold. So it is about it's not limiting ourselves to 1 a year, but it is limiting ourselves by quality thresholds of the businesses that we are prepared to bring into the group. Just picking up your point, Sam, around the operating margin I mean that 13.9 percent which we delivered in the first half, I mean we were absolutely delighted about that. And you said does the achievement of that change our view in the medium term? I think there's a couple of things there. You rightly flagged the stunning performance that we had in Woodies in the first half. And Its operating margin of 22% in the first half inevitably Will soften as we tend to move forward. I'll turn to that in a moment. But clearly, that was a significant component of that first half achievement on operating margin. So we would expect that with the composition of the businesses that we've got now that there'll be some dilution of that As we move forward. But the other key element will be the point that you make around acquisitions. Our acquisition criteria remains a good single digit operating margin. And for us, For distribution business, a good single digit operating margin remains something north of 7% on an old money basis, So pre IFRS basis, so let's call it in round terms, let's call it 8% in the IFRS world. So operating margins north of that combined, really importantly though, with a good double digit return on capital employed. At the end of the day, return on capital Liquidity is absolutely an essential metric for us. So what we don't want to do is we don't want to discount opportunities that might arise For good single digit operating margins just because at this point in time, we did we've got double digit operating margins. So it may be that the mix of the business changes as we move forward, but paramount is return on capital employed. On Irish retail, you rightly say it was an exceptional first half. And I have to say over recent days, I was sort of just reminding myself about what We did regard it as an exceptional second half of twenty nineteen. Woody's had an absolute Storming Christmas period, the management team back in the second half of twenty nineteen did an absolutely fabulous job. But if I look back at the second half of twenty nineteen, Then Woodies, at that point in time, delivered an operating profit of £13,000,000 and we were really thrilled with that. That was an operating margin of 13%. I 13%. I then contrast that with the position 12 months later, where in the second half of last year, Woodies was delivering over £30,000,000 in operating Profit. And I think inevitably, we will see that operating profit in Woodies Trend back to a more normal level. And in truth, it's probably fair to say that in a more normal market, Woody's delivering a 10% operating margin would be a very good result. So I think we tend to view Woodies as coming back more towards that level of operating margin than where we currently sit at an absolutely Dupender, 23%. So I think that comes back. We had a stunning first half, as you'll be aware. Woody's was an essential retailer in the first half. So that did mean that it had a particularly strong period because it did operate For a period where there were very few other retail activities that were allowed to open at that point in time. So Wood East did benefit On that piece. Now the retail market has normalized from a competitive backdrop perspective, so we would expect that we'd start to see it trend back So more normal levels of activity. Brilliant. Thank you. Thank you. We'll now go to our next question from Fleur O'Donohue from Davy. Please go ahead. Thank you. Good morning, everyone. I'm well done on the results. Just a couple for me. First, I think it's more a technical one for David. Just wondering when GB Merchanting is sold next year. You might have said this before, just the impact on the leases in terms of the balance sheet. The second one is, if I can return to your guidance, I'm just Trying to understand it a bit better. If we take it that your prior guidance for trading profit for the year Was circa kind of low 230s and clearly exceptional H1 with a result of over 140. I'm just trying to understand maybe a bit better what you see coming through in the second half, given it seems that Your implied guidance suggests the results below €100,000,000 And we also obviously have to allow for the fact that we've like KH in, Which I think should be chipping in, call it, €9,000,000 or so for the second half. So just really trying to get a kind of an understanding of the bridge to the kind of guidance or kind of possible H2 performance, if that's okay? Yes. Let me pick those ones up. I mean, I think from a technical perspective, I would urge, if anybody Really wants to get into detail of it. The Note 14 that we've actually got in the account, I hope brings to life The transaction and explains it in more detail. But if you do look there, we break down the balance sheet. And you'll see from that analysis that at the end of June, the level of lease liabilities within the GB traditional merchanting business was £67,000,000 of liability. So that's effectively come out from that Calculation of consideration. So I think that's hopefully enough of a guide for you there, Florian, in that regard. On the guidance and our thinking around the guidance, We've got coming up some key trading months in the business. September, October November are really key trading months for the distribution businesses. We've got a trading update that we'll be planning to do 2nd week in November. We've also, as you'll have seen, Announced that we'll be doing a Capital Markets Day before the end of the year, and it may well be that we tie those 2 together. And I think that's a really important point For us to take stock of how we've seen September, October trading and also I think gives us a bit more visibility around how the momentum looks going into next year. I think we if there's an element of caution, which I think is where you're coming to on that, I think The first thing does come back to that headwind, which we will be seeing on the retail side. There is no doubt that we're up against a really strong comparative for the second half of last year. And I think we'll be definitely trending back more to that second half of 'nineteen rather than the second half of 'twenty. Now you're right, that's compensated, if you like, to some extent by the acquisition of IKH which comes in. I think More generally, when we're seeing that McDonald's are having trouble feeding their branches with milkshakes, I think it does highlight some of the challenges around the supply chain. So I think we need to be a little bit cautious about how that plays out. I think the Supply chain challenges which we've seen in the first half aren't likely to disappear in the short term. So I think there's an element around Supply chain that we need to be a bit cautious about. I would imagine that sort of based on these numbers, We'll see in terms of the underlying trading probably a little bit of settling up that you might be doing around the trading performance maybe by 1% Or 2%. But I think the appropriate point is to really see in November how we see that important autumn market trading. Gavin, anything more on that? No, I think that's absolutely it. As David said, the autumn is a critical period for us. When we do the trading update in November, we'll have September, October behind us. We'll have a really clear view. And I still think there's an element of We are here certainly in terms of the COVID world. Our core markets of the UK, Ireland and the Netherlands have got high vaccination rates. We're hoping that we get no more restrictions going forward. We're hoping that we get no more restrictions going forward. But it really is a case of getting through sort of September, October, November Key trading months and see where we get to. Thanks, Gavin. Thanks, David. That's great. Thank you very much. Thank you. Our next question comes from Amy Gala from Citi. Please go ahead. Yes. Good morning, guys. Just a couple from me. The first one was on Ireland and the addition of fixing center in your Chadwick branches. I'm wondering if you could give us more color around is the product portfolio there similar to the sort of tools and fixings offer In Selco or in the Dutch merchandising business? And is that the plan is there a plan to roll out a similar fixing center across most of the Chadwick branches? The second question just was on the point in supply chain pressures. If you could also give us some more color around the availability of tradespeople, how do you feel that element into the autumn trading months? Okay. Thanks, Amy. I mean, in terms of the Chhabra's I mean, the first one was obviously a trial. It's gone very well. It is absolutely about putting a range of products in Around fixings and anchors, that is very similar to what we have in the Dutch business, and we'll continue to monitor the success of that. And If it continues to be successful, we will roll it out into more Chadwick's branches. But it is about a just a more clearly defined product assortment In that kind of fixings and anchors sector, which is something that we do very well in the Netherlands. We do very well in Selco We just thought we could do a little bit better in Chadwick. That's part of the beauty of the business that we have is that you can continue to Refine it, you can continue to experiment with things. I'm not saying that everything that we always do would work brilliantly, but the early signs of that extra The focus on fixings has been very positive. I mean, it's also worth remembering that in the context of the group turnover, It's always going to be a relatively small number. It's just about the small incremental improvements in some of the well established businesses. In terms of the availability of tradespeople, of course, it's quite interesting. With the divestment of that traditional GB Merchant Business, We really do now become absolutely clearly focused on the RMI market in the UK, which tends to be smaller organizations And sole traders and people working in partnerships. And we haven't yet seen an issue in terms of the availability of tradespeople Through Selco or through Leyland SDMs, I don't believe that's going to have a significant impact on us in the second half of this year. It's something that we're very aware of that's happened on some of the larger sites and that may well have an issue in terms of the larger house builders And what then happens in terms of our mortar manufacturing business, but in terms of our core distribution business in the UK, that's not something that we haven't built in Conservatism based around the availability of tradespeople for the second half. Thank you. That's helpful. Thank you. We'll go to our next question from Sam Cohen from Peel Hunt. Please go ahead. Good morning, guys. Just one kind of semi technical one, I guess, from me. On working capital, when can take the point that it's going to reverse in the second half as this trade normalizes. If I kind of push forward to 2022 and beyond, given you've Divested the UK distribution business, which is going to be more credit than cash based and replaced it with IKH, which remind us, I think has a higher kind of Cash penetration and credit, correct me if I'm wrong. But the whole group has probably moved it's up to percentage of cash business rather than credit. Does that change materially the working capital requirements of the business going forward as you grow? And have you become more cash generative in that regard? Some comments are on outlook. Yes. It's a good question, Sam. And just to remind everybody, when you look at the working capital Which we had in the first half, it was very strong indeed. In fact, when you look at the balance sheet, There was just £6,000,000 of net trading working capital and that was very much a function of our broadly based cash based businesses, Selkham Woodies performing particularly strongly and we saw a swing between June 'twenty and June 'twenty one on those two businesses alone Of about £50,000,000 where they went from a positive working capital position at June 'twenty to a negative one at June 'twenty one. Now that position, I think, will reverse as we go in the second half of the year and we start to see that more normalization of activity levels. Whilst we have disposed of the GB traditional merchanting businesses, which is Relatively speaking, more working capital intensive. IKH itself is a trade based business and very similar in working Capital characteristics to our Dutch based business, which typically carries high levels of inventory and is predominantly a trade based Customer. So I think there is a working capital intensity that goes along with that. Clearly, the future development The working capital intensity of the group will be influenced by the nature of the acquisitions, the sort of businesses that we're buying. So I think we might see a slightly lower level of working capital intensity going forward than perhaps we had if you were to take 2019 is a base year comparator, but I think it will be influenced by acquisitions going forward. And I would still Always say the most important thing for our customers is to be able to go into one of our branches and find lots Stock available that they can buy. That good stock availability is absolutely paramount. So I think we're very happy Investing stock, that becomes an important element. But don't be surprised if what you see us is buying businesses with a significant element of the Trade debt to book because we are very much focused on the trade customer and the RMI sector within that. As we have no further questions, I'd like to turn the conference back over to your speakers today for any additional or closing remarks. Thank you. No, I think most of you know us very well. Most of you know the business very well. So if you have any further questions, obviously, feel free to get in touch with us. I think the first half has been really pleasing from our perspective. And as I've said before, sort of operationally, financially and strategically, The business is in a very, very good place. As ever, we appreciate your interest. We appreciate your time this morning. And we hope you all stay safe and well, and we'll speak to you soon. Thank you very much everyone. Thank you. Thank you. That will conclude today's conference call.