Hello, and welcome to today's Ocado first quarter Analyst call. Throughout this, your participants will be in a listen-only mode, and afterwards, there will be a question-and-answer session. Just to remind you, this is being recorded. Today, I am pleased to present David Shriver, Communications Director, and Duncan Tatton- Brown, CFO. Gentlemen, please begin.
Good morning, everyone. This is David Shriver. Welcome to the First Quarter Sales Analyst call for Ocado Retail, which, as you all know, is a 50/50 joint venture between Ocado Group and M&S. Our Chief Financial Officer, Duncan Tatton- Brown, will give you a brief summary of Ocado Retail's performance in Q1. Before updating you on the impact of the coronavirus outbreak, we'll then go to questions. Duncan, over to you.
Thank you, David. I know that these are troubling and challenging times, and you'll want to hear about the impact of the coronavirus on our business and our responses to it, rather than to focus too much on the quarter just ended. I promise I will get to that. First, let me just summarize the quarter because that will put in context our current trading and the challenges we're now facing. Our first quarter was in line with guidance. Sales grew overall 10.3%. We saw double-digit growth in customer transactions, with further growth limited by our current lack of spare capacity even before recent events. It's important to note that the impact of higher basket values and order demand amid escalation of the coronavirus was limited in the quarter, which, by the way, ended on the 2nd of March to less than 0.5% of the sales.
In the short period since the end of the quarter, sales have picked up, and current sales growth so far has been running at double the rate we saw in the first quarter. At the end of last week, traffic to our website was running four times higher than the highest peak ever recorded in the business before we put in the queuing system. We believe this sales growth includes an element of forward buying, which will unwind at some point. As you'd expect, the biggest increase in demand is in ambient categories, which, if not needed in the near- term, can be consumed at a later date. Also, keep in mind that there are higher costs involved in running the business at the limits of capacity. In meeting the challenges of the pandemic, the business has been undertaking all preparedness measures, including rehearsals to cover various scenarios.
We are following every government directive, which includes all relevant guidelines from Public Health England to the Foreign and Commonwealth Office and NHS, to help to delay the spread of the virus. We're making changes to the way that we operate. We're supporting our staff who need to come to work when it's safe to do so, as they are essential to serving our customers who need our deliveries. We're also allowing those who don't need to come to work to do what they can from home. We're supporting our customers by doing our utmost to meet their demands, particularly those in the greatest need, although we won't be able to satisfy all the demand that exists. Yesterday evening, we closed the access to our website. No scheduled customer deliveries will be canceled as a result.
We're fully booked for the next four days, and we'll use the time to complete essential work that will help make sure distribution of products and delivery slots is as fair as possible for our customers. We have changed our operational procedures to only deliver to the doorstep and to temporarily not take back plastic bags for recycling. We appreciate the forbearance of our customers for these changes and for those who cannot get the delivery either when they want or at all. We're working with our suppliers to meet the increase and less predictable demand and have gone to immediate payment terms for smaller suppliers to support them at this critical time.
Now, we can't address theoretical scenarios on this call, but we will follow the latest established protocol for any scenario, which includes informing Public Health England of any affections amongst our staff so that we can enact the advice they give us. As of this morning, we've not had to reduce capacity because of any impact of coronavirus. Briefly, elsewhere in the business, preparations for the switchover from M&S to Waitrose M&S are well in hand. The performance of our new immediacy offer in Ocado Zoom remains both positive and encouraging, and we're currently planning the rollout of additional micro fulfillment centers. Our facility at Erith, CSC4, the largest grocery fulfillment center in the world at maturity, continues to ramp up to now over 80,000 orders per week.
We are, of course, working to ensure that we deliver to customers at a time of exceptional strain and stress for the whole of society, and we trust the resilience of our business and colleagues will see us all through. With that, I'm now happy to take your questions.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press Star and then Two on your phone keypad now in order to enter the queue. After I announce you, just ask your question. If you find that question has been answered before it is your turn to speak, just press Star Two again. Please press Star and then Two on your phone keypad if you wish to enter the queue. There will be a brief pause while questions are being registered. Our first question is from the line of James Anstead at Barclays. Please go ahead, James. Your line is now open.
Yes, just one question from me, and I appreciate this is Solutions rather than Retail in terms of the question. I don't know if you can talk about whether the restrictions on people's ability to travel is impacting the work you're doing to prepare the CFCs in places like Canada, the US, France, etc. Is that being impacted at the moment, or can that be overcome by remote working?
James, good morning. Of course, travel bans and travel restrictions will have some impact for individuals. As of this week, no, we've seen nothing that causes us a concern in terms of the impact of the opening program. Clearly, as I said on the introduction, I'm not going to go into hypothetical scenarios, but to date, no, there's been no impact.
Okay. That's very clear. Thank you.
Okay. Our next question is over to the line of Vincent Lee at Bernstein. Please go ahead, Vincent. Your line is now open. Hello, the line from Bernstein. Please go ahead. Your line is open. Your line may be on mute. Okay. As there is no reply, we will go to Xavier Le Mene at Bank of America. Please go ahead, Xavier. Your line is open.
Yes, good morning, gentlemen, and thank you for taking my question. First one, you're talking about a change in the mix of products, but how is it affecting potentially the operations? Do you see any slowdown because you've got to reassign more space to ambient food rather than fresh? The second thing, you stopped your website and you're talking about a new queuing system. Can you elaborate about what it means, actually?
Yeah, good morning, Xavier. Yeah, there's not been any—the mix change between ambient fresh hasn't, in and of itself, given any impact to our capacity. If you recognize that in the first quarter, we were growing at the limits of our normal capacity, growing about 10%. We're now growing at about 20%. That clearly gives you a sense that we're getting a lot more capacity. An obvious explanation of that extra capacity is the fact that customers will take deliveries any day of the week now, any time of day, whereas previously, there would be certain times of the week which were less attractive in aggregate to our customers, so we weren't operating at peak capacity. We're now operating at peak capacity every hour of the day, every day of the week, so we can get a bit more capacity out.
No, the split hasn't particularly impacted our ability to get that extra capacity. In terms of the website, we took the decision to close the website not because of technical problems with our infrastructure. Simply put, we were completely booked out for the next four days and heavily booked out after that. We want to use the time to make some changes so that there's a fairer distribution of the capacity that we have. I really don't think I'm exaggerating in saying that if we had the capacity today, we'd be selling 5 or 10x the amount of groceries that we currently are because of the completely unprecedented demand today. Therefore, it is important that we have a mechanism for being as fair as possible for as many of our customers as possible.
Okay. Thank you.
Okay. We now go to the line of Andrew Gwynn at Exane BNP . Please go ahead. Your line is now open.
Good morning, all. First point on the point of clarity. I think you said, the statement says that orders doubled so far, and then you're talking about sales doubling. I presume there's quite a big change in basket size. I'm just wondering if you could comment on that briefly. The second question, just the obvious point on supply. Obviously, working tight, and everyone works from hardwood suppliers to bring that in, but just wondering if you could give us a quick update on what you're seeing there. Just going back to James's question on the kind of partner opening program. I mean, it seems sort of prudent for us to think that we could see a bit of a delay there.
Would that have a significant impact on profitability for the full year, or is that just not really a consideration at this stage? Thanks very much, Tim.
Good morning, Andrew. Yes, with apologies, I actually think our comments around double-digit increases in customer orders is probably not as correct as it should be. That is a polite way of saying it. This is a double-digit growth in revenue more than orders because we are seeing big growths in basket size. The growth in orders is not at the same level. The growth in capacity that we pick for our customers is at 20% growth, but some of that is coming through in larger baskets, which I think is completely understandable and I think sensible. Hopefully, many of our customers are using the slot that they get to order for themselves, but also for those that they can support. Certainly, we would want to encourage that, that people support those more vulnerable nearby because we will get more deliveries.
We'll get more groceries to customers if we have slightly fewer, slightly larger orders. From a supply side, of course, apart from the much-reported items where there are some stock shortages, often driven by, frankly, the spikes in customer demand, we have some problems there. Generally, our suppliers are able to cope with our demand. I think we have to use the word generally because in many businesses, there are some impacts, and the impact of coronavirus on consumers, but also on employees of those companies, means that there will always be some impacts. There is plenty of food and plenty of products, even if there are some isolated cases of constraint, not least because there's pretty unpredictable demand from customers now because we're not dealing with the normal situation.
The last point, again, I don't really want to speculate too much on what might happen over the months and months to come, but I think it's worth noting that our revenue assumed for this year for International Solutions, we said, was less than GBP 10 million. Even if you were to assume some form of delays to that, the impact on this year is not significant.
Okay. That's all very clear. Thank you very much.
Okay. Our next question is over to the line of Rob Joyce at Goldman Sachs. Please go ahead, Rob. Your line is now open.
Hey, good morning. Thanks very much for taking my questions. Just a couple from me. First one, obviously, you're operating, as you say, at sort of capacity. Just wondering what is the or are the bottlenecks? Is this in processing through the CFCs? Is it in getting the number of vans on the road? Just so we can understand that, that'll be great. The second one is just thinking about maybe how this impacts behavior longer term. Are you able to break down what is the increase in orders sort of coming from existing customers, and what are the volume of new customers coming to the platform? Thank you very much.
Good morning, Rob. Yeah, the biggest constraint is in our ability to process the orders through our CFCs. Again, we were constrained in the first quarter based on a normal profile of demand, and that was limiting our growth anywhere in the first quarter in the current situation. It is the major, without doubt, the major limit. Vans and drivers are, as it says, they're actually much more movable. If there are changes in demand, one can move them around to a certain extent, and they're relatively easy to add more of. The problem we can't do is we can't build CFCs overnight to satisfy this demand, and we were short of capacity beforehand. In terms of behavior, we have closed the website to new customer registrations. This growth in business is effectively all from our existing customer base.
No, we're not taking new registrations from customers. As I said earlier, we have so much demand that we can't meet. It didn't seem sensible for us to add new customers at this point in time.
Okay. Thank you. Just to confirm, you did say earlier if you did not have capacity constraints, you reckon you could be doing 5 to 10x the level of sales.
Yeah. Yeah. I mean, the amount of demand is simply unprecedented. That, I think, is understandable why consumers would want that at a time when they're trying to reduce contact. Yes, I think if we had those extra facilities, we would be serving a lot more customers now.
Thank you very much.
Okay. If that has answered your question, Rob, we now go to the line of Maria Laura Adurno of Morgan Stanley. Please go ahead. Your line is now open.
Yes. Thank you very much for taking my question. Just the first one, you mentioned you've reduced the payments of some of your suppliers. I'm just wondering if potentially you can tell us a little more in terms of potential quantifiable impacts on the back of this. The second question, in terms of running already at full capacity and incremental cost being incurred, just wondering what are those? Are you hiring more people, perhaps? Any comments would be helpful. Thank you.
Hi Marie. The working capital impact of this is quite modest. We are at Ocado Group. We have absolutely adequate funding. I obviously will not talk to M&S Group, but they are clearly, I think, in a perfectly good situation. Ocado Retail is not short of funds. A GBP 10 million-GBP 20 million working capital impact for that business is absolutely fine. From a hiring perspective, we were hiring. We are continuing to hire. I think it is worth saying that we have also been approached by a multiple number of companies offering to help out at this time of need. We are liaising with them. As and when we get any significant issues, it may be that we can work with other companies who have sources of labor which they are currently not needing that might be able to help us out.
Nothing to say on that, but I will say that there's a very active series of conversations with other companies who have spare labor capacity.
Okay. Our next question is over to the line of Bruno Monteyne at Bernstein. Please go ahead, Bruno. Your line is now open.
Hi. Good morning. Seem to be swapping name with my colleague Vincent. Sorry for that. Three for me, please. If more demand suddenly surges through a supermarket, you normally have a high contribution margin. Now, from your introductory remarks, you seem to suggest that the extra cost might make the extra demand less profitable. Can you please comment on whether those demand surges are more profitable or less profitable than normal run rate? My second point is, even before the coronavirus sort of started, you were growing at 10%, according to your release, and you say it's a capacity constraint.
Given that you're targeting to grow at 10%-15% this year, what is it about the phasing of the capacity that you're adding in the U.K., or when will you suddenly get a big step up to be able to grow closer to the 15% in the U.K. if we exclude, obviously, the coronavirus impact? Third of all, on your international partners, I presume they're all overloaded with e-commerce demands and their existing operations as much as we are in the U.K. Do you feel any pressure from them to accelerate the rollout plans to be able to use your facilities faster than maybe initially planned, or is it the reverse? They can't deal with the headache of managing that extra project. Which way would they be swinging today? Thank you.
Good morning, Bruno. On your first question, I would say at the moment, our focus is not on spending time trying to understand the profit impacts of this very strange scenario. Management time is not focused on that. Management time is focused on how do we get more capacity out of our business. That's, frankly, the measure that we look at on a daily basis. How do we meet as much of the demand as possible? I haven't asked this question, so this is from the top of my head rather than from investigating it. The point on operating at a peak, being slightly less efficient, I think is clear that in the facilities, when we're operating them as hard as we do, we're not quite as efficient in labor terms. In margin terms, I don't think there's any particular comment to make on margin terms.
I think it's reasonable to assume that better sales growth with fixed costs, obviously not changing in the short- term, is, if anything, positive. In terms of your questions on capacity, there are times in normal years with normal profiles of demand where we're slightly less utilized, obviously, for example, in the summer periods. If we have underlying inherent demand, we would expect to grow faster in those periods. Hence, 10%-15% at times of peak demand is more likely to be closer to the 10%. At times of lower demand, there's more opportunity to be at the higher end of that. That's our guidance. I think when we have new facilities open, Bristol and over Purfleet, all coming on stream over the next couple of years, then I think we have real opportunity to accelerate.
From partner's perspective, I won't say too much now, and I think it's too early to say too much. I certainly don't think it's likely to assume that there will be less demand for our capabilities as a result of this, but it's too soon to say there will be a lot more demand. We'll see over time what happens.
The point was also about whether they're pressuring you to go faster on your existing commitments or whether they're rather trying to delay on the deployment plans of your existing commitments.
Bruno, as of this week, we haven't seen any delays in our operational, our ability to deliver those facilities. Because we said that they were going to open in the first half of this year anyway, they're obviously relatively soon. Don't assume there's any request from the businesses to delay those openings. I don't want to hypothesize, but obviously, if governments change their instructions, we're at the mercy of what governments want to do. At this stage, no delays to those facilities.
Thank you. Thank you very much. Very helpful. Thank you.
Okay. Our next question is.
Hello. Hello.
Nick Coulter from Citi. Please go ahead. Your line is open.
Hello. Thank you very much. Good morning. Three or four, if I may. Firstly, on your ways of working in the CFCs, they ask how you change those to try to kind of take the risk out of or minimize the risk of contamination. I note the temperature scanning comment in the release. Secondly, I guess it goes without saying that you're leading technology in your field. Without intending to be flippant in any way, why hasn't the app or the website been able to effectively process and, I guess, politely turn away the new customers? Is this an issue of capacity or the size of the pipes on the front-end customer interfaces? Thirdly, to what extent do you think you might be able to scale Erith faster?
I guess that's a case of building out the picking stations, introducing additional robots on the grid. If you could kind of talk through those discussions that are going on around driving capacity. Lastly, on the present sales run rate and kind of the 5% ahead of 10%-15% range, if demand persists, which it might well do given the transition from food away from home to food in the home, is there any reason why you wouldn't expect to kind of keep 5% ahead of your revenue guidance, notwithstanding any disruptions to supply or to the workings or the operations of the CFCs? Thank you.
Okay. Nick, a few questions there. Some comments on ways of working in the facilities. As you said, we have temperature scanners for our employees coming to site so that we could identify anybody who has a fever and take the appropriate action. We have changed cleaning regimes with multiple times a day, multiple times a shift. I think it's actually even hourly cleaning of some of the areas where transmission of disease could be at its highest risk, obviously things like metal surfaces and hand railings, those sort of things. Segregation as far as we can in terms of our employees so that they're in different groups in operational areas and also, to the extent we can, separate groups in the rest areas so that we minimize the risk of any impact there.
Of course, very clear instructions for those who have symptoms to self-isolate and washing your hands and all the now normal operational procedures. From the question around the website, the first thing to say is, in some ways, the customer demand to our website at first appeared like a denial of service attack. This was a completely unprecedented surge in demand. I could chuck a bunch of stats at you. One hour in the week where we had 100x the typical demand, doing the whole of the typical weekly business in less than a day, sheer huge quantities of people waiting to queue. Like all organizations, if I told you we had 10x spare capacity from a technology perspective, you'd spend a lot of time asking me why we were running so much extra cost when it wasn't necessary.
No, I don't think any of this is a reflection on our capabilities. It's just completely unprecedented from a demand perspective. The reason, as a repeat, for closing the website is it's not a technology infrastructure. It's a desire to make changes so that we can more fairly distribute the capacity that we have amongst customers. In terms of Erith, we were already capacity constrained. We were already wanting to grow Erith as fast as possible. You heard me mention that we've grown capacity from just over 70,000 to over 80,000 just since our results presentation, so literally over the last month. As an aside, our efficiency of that facility has improved dramatically. As an aside, our engineering costs continue to lower.
The biggest thing we'd like to do now is just keep growing that capacity, and we'll look to do that as fast as we can.
What stops you going faster, Duncan? What are the constraints?
The sort of typical normal ones of hiring more people, which is more challenging at this time, manufacturing more robots, getting those robots onto the grid. Transport, movement restrictions, labor restrictions are not helpful, but at the moment, I would not assume we are going to go slower. You have got to understand in business, almost any business that you talk to has some form of constraint because the virus has spread to the extent that people are self-isolating in lots of businesses. The ability to go faster is just challenging. We are obviously working on it.
Okay. The picking stations are built, are they? Or you're in the process of building those out as you go?
We were in the process of building them out. Nick, I could not comment today because it has not been the focus of our management team over the last week or so on the status of those picking stations. No, we are building capacity for ourselves and, by the way, for our overseas partners. Our ability to grow it substantially faster is limited. It already was limited, and it clearly remains limited.
Thank you. The 5% run rate question.
I think there's a series of assumptions in there around how long the current situation lasts. I think there is a question in there for all businesses of what impact, as the numbers with this grow, so the numbers self-isolating grow, what impact this may have on workforce, which is why at the moment we don't want to change guidance. It's easy for anybody to run a scenario where you could show that that's better if you assume limited impact to workforce and sustained period of extra demand. I don't think at this stage it's worth me hypothesizing because that's looking to the future of something which is happening, is real and happening now and changing all the time.
That's great. It's helpful to understand your thought processes. Thank you.
Okay. Our next question is over to the line of Tom Davies at Berenberg. Please go ahead.
Morning all. Thanks a lot for the questions. Three questions from me. First question. You guys receive insurance proceeds from demand that you're unable to meet due to the loss of capacity onto your handover. Is this insurance proceeds capped at all because of this exceptional demand level? Second question. By closing the website, are you guys at risk of causing some increased customer churn of your existing customers and therefore, in subsequent periods, will require increased marketing spend to recapture some of this? Finally, you say that manufacturing the robots is one of the constraints in expanding capacity at Erith. Is fastest facing any issues in terms of a supply chain perspective in building the robots? Thanks.
Yeah. Tom, good morning. Thank you. Three interesting questions. Yeah. From an insurance perspective, business interruption, because this is effectively the type of insurance we're talking about, already is more of an art than a science because this is what was the alternative scenario that operated prior to this versus the reality that turns out. That is a debate that we'll have with our insurance company over the months ahead. We weren't expecting to conclude that debate shortly. I think I can comment on that more once we've had a bit more time to consider that. Your concerns about increased churn from customers, I think it's too early to comment too much on this. What I would say, without doubt, is that our customers are not finding our service quite to the same level that they would normally expect from Ocado.
Having said that, we're delivering 98% of goods, so we are shorting and we're missing goods much greater than we normally would expect ourselves to do, but I think still at an incredibly high level. I think the teams involved in our facilities and driving to customers and, frankly, in the head offices talking to suppliers and doing an amazing job despite that. Have no doubt, some of our customers are not happy. That's not surprising because they can't get our service with the ease that they used to be able to. They're having to wait to book a slot. Sometimes they're not getting a slot. There are some, as it were, downsides, but I hope and I believe that our customers recognize that these are unprecedented times. No, at the moment, I wouldn't assume any greater churn.
Lastly, in terms of manufacture, I will not comment specifically on fastest as one. Within the robot, there are plenty of items that come from overseas. Clearly, those types of things can cause constraints, and there have, without doubt, been some constraints. One of the items in a robot came from Wuhan, one of the earliest areas impacted. That has cost us a very modest amount of money to find an alternative supply. That is just illustrative of the impacts of this being all over the place. Growing capacity faster in terms of robot manufacture will be difficult, but also not flagging any challenge, any substantial change. I think we are able to cope.
Excellent. Okay.
Our next question is from the line of James Lockyer at Peel Hunt. Please go ahead, James. Your line is now open.
Hi, good morning, guys. Thank you for taking my questions. I had some technical issues. Hopefully, you haven't answered these ones before. In terms of you spoke in the past about your ability to change what is shown to customers based on the estimate of when they're going to be ordering and what's available. Obviously, just wondering if you've been able to manage customer choices, number of same items in baskets, for example, to sort of manage a smoother operation and a more smoother operation between customers. Good to hear about that. Also, I think on around Zoom, if you have any impact benefits there in the Q2, perhaps Zoom, please. Thanks.
Yeah. Good morning, James. In terms of changes to our operations and make it easier for us, we haven't had to make any substantial ones. We will continue to look at that. I think what you've heard from some other retailers are ideas that it's worth considering. Just so, for example, restricting range is an area where we could consider. Actually, for Ocado, given our technology and automation, we can continue to pick a big range because of the way we set up with multiple pick cases or in our newer facilities with our storage. There is limited pick efficiency by limiting the range. I don't think you should expect to see a lot from us, but maybe some of the fringe areas will make some restrictions. We already have some constraints on particular products so that customers can't order too many multiples of individual products.
Some of that is for supply availability reasons, such as, for example, toilet roll. Others can be the typical ones of not selling too much bottled water because that removes capacity that could be used delivering groceries to customers.
Gotcha.
Your second one, James, I've written down impact, and I can't remember.
Zoom.
Apologies. Zoom, of course, yes. In Zoom, Zoom is symptomatic of the rest of the business, which is there is unprecedented levels of demand, and slots get booked out very quickly, and there is not the availability to go to the app today and get an order in the next hour because slots are being booked out. Customers who are in that catchment are using it. It is being used as much as it can.
Excellent. Thank you.
Okay. Our next question is over to the line of Simon Bowler at Numis. Please go ahead, Simon. Your line is now open.
Thank you. Apologies. I missed the first couple of minutes of the call, so I don't know if you're up on this, but I think I heard you say towards the end you're now in the process of rolling out kind of multiple Zoom facilities. I just wanted you to give a little bit kind of more color on that. Just kind of secondly, I imagine it's a relatively difficult time to kind of appraise the kind of performance of the Zoom, given the unusual kind of basket size and behavior that you're seeing out of that. Do you think you've got kind of enough data from your kind of period of trading before we entered this unprecedented situation to give you confidence that you need in terms of a broader rollout of the proposition?
Simon, good morning. Yes. I think the confidence is without doubt there. We have liked the learnings that we've taken over the sort of trial that we've been running for a year. Yes, we want to take it forward. The point is not on we're in the actual rollout of additional micro fulfillment center Zooms, but we are planning the rollout. The discussions are ongoing, and we're working on projects, but they're not all, in fact, yeah. We're not in the construction phase of multiple. We're in the planning phase of multiple. It's not top of mind today. Obviously, over the last couple of weeks, management focus has been on other things, but no, we're very encouraged.
Okay. Makes sense. Thank you.
Our next question is from the line of James Grzinic at Jefferies. Please go ahead, James. Your line is now open.
Yes. Hi. Good morning, guys. I actually did not have a specific question. I canceled it, but I'll ask one in any case. Can you perhaps be a bit more explicit on the date of when the first two CFCs will open? We have got a bit of a marker of when to expect that those first two international facilities are up and running, given that we are in the middle of half one 2020. Thank you.
Good morning, James. I know the dates, but I won't be more explicit. That is not to be difficult, but I think the important thing here is it's for our clients in this case to decide how and when they let their stakeholders know. We know how they're progressing. We know when they're planning to announce, but I won't disclose that yet because I think that's very much for them. Just to repeat, we're still expecting them both to be in the first half of this year.
Great. Very clear. Thank you. Thank you.
Thanks.
That was the final question for today's call. Now, please pass it back to you for any closing comments at this stage.
Thank you, ladies and gentlemen. That concludes our quarter one trading call. In normal times, we'll report to you next on the 7th of July. I hope everybody keeps well. Thank you.
This now concludes today's call. Thank you all very much for attending. You can now disconnect your lines.