Hello, and thanks for joining us for this presentation of Spirax Group's 2024 results. I'm joined by Louisa Burdett today, and by now you all know her well. Actually, this is the first set of results that Louisa is presenting as our CFO. I'd like to start by acknowledging the hugely positive impact she's had on our group since she joined us last July. Let me now summarize our 2024 performance. All three businesses delivered organic growth as well as margins in line with our expectations. Full-year group organic sales growth of 4% was well ahead of global IP of 1.7%. Growth was delivered against the backdrop of a challenging trading environment characterized by, firstly, third-party IP forecasts that were revised downwards throughout the year in light of shifting macroeconomic risks. In particular, the second-half recovery that was forecast for IP did not materialize.
Secondly, a significant headwind to our STS business in China, which I highlighted at this time last year. Thirdly, a slower and more gradual recovery in BioPharma orders than we had expected at the beginning of the year. Finally, material currency headwinds to growth and margins. Against this backdrop, we focused our efforts on delivering against the operational priorities that are within our control and advancing the execution of our strategy. I'm really pleased with the strong positive trajectory in ETS. Our priority for this business is to improve the margin to 20% and deliver on its high growth potential. Supported by improving manufacturing throughput, we delivered organic sales growth of 10% and a margin improvement to 16%. We are seeing a significant pipeline of customer inquiries for our decarbonization-related electrification solutions. We are on the right path to delivering on our targets.
In STS, organic sales growth was 1%, but outside China, we delivered strong growth of 4% against a comparable IP of 0.8%. In Watson-Marlow, which grew organically by 3%, we saw strong growth in process industries compensating for broadly flat sales from BioPharma. In both cases, our growth was achieved through focusing on our target sectors and delivering on our solution selling. We protected margins in 2024 through continued pricing discipline and efficiency savings. Our group margin was 20.1% despite the partial reversal of prior-year cost containment actions. Importantly, we increased investment in our future growth. We returned to higher cash conversion at 87%, supported by working capital improvement and lower capital expenditure, reflecting our focus on maximizing manufacturing capacity utilization.
Having set out our intent at the Capital Markets event in October, we've also taken decisive action to simplify our organization and better position the group to deliver long-term, highly profitable organic sales growth. Louisa and I will talk about this more later, but the restructuring activity began at pace in January and is proceeding to plan. Now, it's just over a year since I became CEO, and I'm very encouraged by the progress that we've made in that time. The actions we've taken will put us in a stronger position to deliver on our financial objectives for the future and on our future growth potential. Most importantly, I'd like to thank my colleagues around the world for their commitment as we executed on the operational priorities within our control. I spoke about a challenging trading environment. Let me now expand on what we faced in 2024.
Now, thermal energy management is necessary in almost all industrial production processes, and we're present in almost all sectors and regions across the world. Global IP growth is an important lead indicator across our businesses as customers manage their production capacity, productivity, and efficiency in line with anticipated demand. Equally, we aim to outperform IP growth through execution of our business model and our strategy. Through our local direct sales force and deep understanding of customer processes, we help them improve cost efficiency when times are hard, and we help them improve productivity and capacity when times are good. With this in mind, let's now turn to the IP forecasts. Global IP growth for the full year was 1.7% and a much weaker 0.8% excluding China. The top-left chart shows the downward revision in forecasts throughout the year.
Following weak IP growth in the first half, the forecast improvement in the second half did not materialize, as shown in the top-right chart. Actual growth was 1% excluding China. This was not limited to a handful of sectors or countries but reflects more caution from customers more broadly. IP has been lower for longer than we and many others had expected. We saw industrial production fall compared to 2023 in key markets: the U.S., Germany, France, Italy, and the U.K., which represent over 50% of group sales. This is only the third time in four decades, as far back as we have consistent and reliable data, that we have seen contraction in all of these markets at the same time. For China, IP forecasts remain uncertain with a wide range of expectations across different providers.
What we're seeing in China is a meaningful slowdown in the expansion of customers' manufacturing capacity in light of increasing barriers to global trade. Looking to 2025, CHR's forecast for global IP is 2.1% and 1.9% excluding China. First-half growth, excluding China, is forecast at 1.7%. Growth is weighted towards the second half with 2.1%. This requires healthy sequential growth quarter on quarter above the rate achieved in the second half of last year. In the current highly uncertain macroeconomic environment, these forecasts follow a familiar pattern. We are taking a cautious approach to IP in 2025. We recognize IP is likely to be weaker in the short term, with potential for further disruption from tariffs and other geopolitical events. Wherever it eventually lands, we are confident that we will continue to outperform IP in 2025.
We're closely monitoring the situation with tariffs and assessing the impact on our operations. In all three businesses, we manufacture in the U.S.A. to meet a significant proportion of domestic demand. Through a combination of this regional manufacturing, changes to sourcing, and our price management, we're prepared to respond to the effects of tariffs. The precise impact is difficult to gauge while uncertainty remains high, particularly around the broader consequences for the macroeconomic outlook. I also recognize that an important part of our group and Watson-Marlow, namely our BioPharma business, has been going through a period of volatility. We felt that this year it was important to share some additional insight to help explain our sales growth and our guidance. As a reminder, BioPharma accounts for 12% of group and 50% of Watson-Marlow's sales.
In 2024, we saw the beginning of a recovery in new order intake from BioPharma customers with double-digit growth, albeit this was off a low base. That followed a decline in orders of over 50% by the end of 2023 from the COVID-related peak in 2021. We saw good growth in end-user customer orders and sales, which account for about three-quarters of total BioPharma sales. Large OEM customers also improved from a low base, although with high month-to-month volatility. We saw orders improving from large OEM customers, but sales to these customers declined. Looking to the chart on the right-hand side of this slide, you will see that total BioPharma sales were above orders in 2024, as they have been in recent years, supported by the large carried-forward order book. Our order book has now normalized.
That means that going forward, sales growth will be driven by new order intake. Now, while we anticipate continued double-digit recovery in BioPharma orders, this is coming off a low base, so sales growth will be below orders growth. Hopefully, that gives you a little bit of insight into the quite complex moving parts and also why we expect a more gradual recovery in BioPharma. The underlying drivers of BioPharma demand remain robust, as is reflected in the end-user activity that we're seeing. I'll now hand over to Louisa to share more detail of our financial performance in 2024 and set the outlook for 2025.
Thanks, Nimesh. Good morning, everyone. Before I start, I'd like to draw your attention to a couple of presentational points. The numbers we will be discussing today are the adjusted results, and a reconciliation between statutory and operating profit is included in the appendix. Our definition of organic growth excludes the effect of currency movements on sales and profit. Of course, we did not have any M&A in the period. As guided, the effect of currency in the year was -5% on sales and -8% on operating profit. Our full-year numbers were in line with the expectations we set out at our half-one results. From a group perspective, sales were 4% higher year- on- year, well ahead of IP and driven by growth in all three of our businesses.
Operating profit also grew 4% on an organic basis, and operating margin of 20.1% was 10 basis points higher organically. Net financing costs were slightly lower than our guide of GBP 45 million, but GBP 4 million higher year- on- year due to the annualized impact of a higher coupon rate on debt, which was refinanced at the end of 2023. As expected, our effective tax rate increased 100 basis points to 26.5%. Adjusted EPS of 286.3 pence per share was 8% lower year- on- year. That was above the decline in operating profit due to the higher net finance expense and the increase in the effective tax rate. We are increasing our full-year dividend by 3%, reflecting our confidence in a return to higher levels of growth and margin.
On the sales bridge on your next slide, as noted, currency movements had a negative impact of GBP 74 million, or 5% on full-year sales. In STS, full-year organic sales growth was 1%. Having declined 1% in the first half, the business returned to growth of 3% in the second. To explain the relative growth rates in the first and second half, it is worth remembering that we had a strong comp in the first half of 2023 due to the post-COVID expansionary investment phase in China, which was followed by weaker demand in the second half of 2023. In ETS, full-year organic sales growth was a pleasing 10% with a strong second-half performance of 15%. That reflects operational improvements in process heating, which Nimesh will talk about later on.
Watson-Marlow sales grew 3% organically, and as expected, BioPharma sales were broadly flat in absolute terms versus 2023, albeit with some month-to-month volatility. Sales to process industry customers, which are more correlated to IP, performed well throughout the year, particularly in the second half. The bridge on the next page details the movements in adjusted operating profit for the year. Currency movements had an impact, a negative impact of GBP 28 million, or 8%. Profit in steam grew 1% organically, in line with the 1% organic growth in sales. During 2023, we moderated our investment in steam, but during 2024, we sought to retain an appropriate mix of cost with discipline on the base overhead whilst protecting investment for the future. The operating margin in STS at 23.5% was broadly unchanged organically year on year.
In ETS, profit grew by 13% organically, with stronger growth in the second half driven by improvements at our Ogden manufacturing facility alongside good progress at Volcanic. Growth was partially offset by ongoing investment to deliver those operational improvements and some historic orders that could not be repriced for inflation. The full-year operating margin in ETS was 16%, up 50 basis points organically. We saw strong margin improvement in process heating year on year, but lower margins year on year in equipment heating as higher Semicon did not meaningfully recover. Watson-Marlow delivered organic profit growth of 11% and a 180 basis points increase in margin, benefiting from the operating leverage of the increase in sales. Corporate costs were 2% of group sales with increased investments to support key strategic initiatives in digital and sustainability.
Turning to our cash flow, our operating profit to cash conversion rate was 87% because of improvements in working capital and decisions that we took on capital expenditure. Capital expenditure of GBP 84 million was 5% of group sales. Alongside our normal maintenance capital, we invested GBP 29 million in our new low and medium voltage production facility in Ogden, which will come online in the early second half of this year. During the second half of 2024, we made two active decisions about our capital program. First, as part of our review of manufacturing footprint and capacity, we put construction of a new manufacturing facility in Gestra, Germany, on hold. Second, with the exception of Thermocoax France, we deferred our planned ERP spend whilst we aligned on the concept of a global common design for all three businesses.
Nimesh will build on both of these two points later in our update when we talk about operational excellence. In recent years, we have invested in expansion projects in Watson-Marlow and ETS. We're now coming through that period of higher capital expenditure versus our historic rates. In 2025, we anticipate CapEx as a percentage of sales to be around the 5%-6% range. The CapEx mix in 2025 will include increased ERP costs offset by lower spend on that Ogden building as this investment completes. Back in 2024, we were pleased that our ratio of working capital to sales improved on a constant currency basis by 1% - 21.9%, with a focus on inventory and overdue receivables. We ended the year with lower net debt of GBP 596 million, which equates to 1.6 x EBITDA.
I'll now talk you through on the next slide through some of the key drivers of our operational performance, and within that context, give you our 2025 guidance, which we're giving for the first time today. Many of the themes that we saw in 2024 continue into 2025. If I start with STS on the left, in 2024, full-year organic sales outside of China was 4%, well ahead of global IP excluding China of 0.8%. We have talked previously about the decline in large orders in China following the period of post-COVID expansionary investment. As a result, in 2024, sales in China, which were 17% of STS in 2023, were 13% lower. MRO sales did increase by double digits in 2024, but they are not yet compensating for this continued weakness.
Again, later on, Nimesh will share some of the actions we are taking to really drive that MRO pivot. In STS, looking forward to 2025, we expect trading conditions in China to remain challenging. We are also seeing the impact of global instability in Korea, which is STS's second largest market in Asia. Weaker trading in China and Korea will be offset by growth ahead of IP in our other markets. If we put these two things together, we expect steam to deliver low single-digit organic sales growth, with margin remaining broadly level with 2024. Moving on to ETS in the middle, we have already talked about our strong operational progress in process heating during 2024, and we are also seeing early signs of Semicon demand improvement from a low base.
Supported by a continuation of these two trends, in 2025, we anticipate mid to high single-digit organic sales growth for the ETS business. Margin progress will also continue, although until we are at full volume, the costs associated with the new building in Ogden will temper the rate of margin expansion. Finally, to Watson-Marlow on the right, Nimesh has already mentioned the total BioPharma sales remaining above orders in 2024 because we were carrying forward that large order book. We did see the beginnings of a recovery in new order intake off a very low base, and that pattern continues to support our view that this will be a gradual U-shaped recovery.
In 2025, for the Watson-Marlow business as a whole, we anticipate mid-single-digit organic sales growth, and that's driven by the assumed continuing recovery in BioPharma orders and, in addition, process industries outperforming IP. This will deliver high single-digit organic profit growth and an increase in margin compared to 2024. On the next slide, at a group level, we guide on an organic basis, and this is based on restating our 2024 results for the impact of exchange rate movements in 2025. If exchange rates at the beginning of March were to prevail for the remainder of the year, 2024 sales would be approximately 2% lower at GBP 1,637 million, and 2024 adjusted operating profit approximately 4% lower at GBP 320 million, resulting in an FX adjusted margin of 19.6%. That FX headwind is driven by the pound strengthening against various of the basket of our trading currencies.
In 2025, we anticipate organic growth in group revenues consistent with that achieved in 2024, with modestly higher growth in the second half. Group adjusted operating profit margin is expected to be ahead of that currency adjusted margin of 19.6% that I've just talked about for 2024, with mid-single-digit organic growth in adjusted operating profit. As we noted at our capital markets day, I would like to remind you that we are forecasting a return of a variable compensation charge in 2025 of the order of about GBP 15 million-GBP 20 million in aggregate across our three businesses and in corporate. We had a good start in 2024, and we are continuing to target procurement savings in 2025, which we expect to generate savings in the mid-teen millions, and that will partially offset these incremental remuneration charges coming back into the P&L.
Our corporate costs will be approximately GBP 40 million, reflecting increases in investments for growth initiatives that are centrally funded. These investments, plus others within the three businesses, will be funded through the restructuring program, which we've noted in our R&S today. This program will realize annualized savings of approximately GBP 35 million, with about 40% of this achieved in 2025. The cash costs to deliver this program are expected to be approximately GBP 35 million, plus non-cash costs of about GBP 5 million, a total therefore of GBP 40 million, focused on improving our organizational efficiency and closing some manufacturing sites across the world. Nimesh will expand on both of those points very shortly. The GBP 40 million exceptional costs are excluded from our adjusted operating profit and also from our margin guidance.
Finally, I would like to draw your attention to the appendix, excuse me, where we have some other group guidance factors around financing costs, ETR, CapEx, and cash conversion. My final slide just reiterates our medium-term margin goal of reaching a 22%-23% operating profit margin whilst continuing to invest sensibly. At the capital markets day event, we laid out the four building blocks of this multi-year bridge. Firstly, organic growth of around 200 basis points. Secondly, around 150 basis points of financial benefit from operating improvements. Thirdly, incremental investments of around 100 basis points to support our longer-term growth. Fourthly, procurement savings targeted to help offset variable compensation returning in 2025. All of these actions still apply, and we have started to deliver on them in 2025, the first year of this medium-term plan.
We remain focused on those medium-term goals, and Nimesh will now take you through how we are delivering our Together for Growth strategy objectives. Thank you.
Thank you, Louisa. I briefly want to remind everyone of that journey we are on as we set out at the Capital Markets event in October. We have got a clear objective to deliver on the medium-term objectives that Louisa just explained, and as set out on the right-hand side of this slide, in the long term, we expect to go further, enhancing long-term organic growth, margins, and shareholder returns. As set out on the left of this slide, a reminder that we have got three strong growth engines sharing a common business model that has enabled us to deliver consistent organic growth ahead of IP over many years and through multiple economic cycles. Our direct sales engineers sell value-creating solutions to solve customers' problems.
We're evolving this differentiated model to be more connected with customers locally, directly, and digitally to anticipate and meet their increasingly complex needs. In the center of this slide, you'll see we have a very significant addressable market opportunity in front of us that we are well positioned to capture through our Together for Growth strategy, which is fundamentally about two things. Firstly, we will accelerate the rate of compounding organic growth in the long term by making targeted investments, which will enable us to capture the significant opportunities we see ahead, generating attractive returns. This includes investment in digital and services and in our unique expertise in thermal energy efficiency and decarbonization.
We will generate the funding capacity for these investments from self-help by focusing on our operational priorities, whether that is through commercial excellence, how we build on our sales capacity and capability, operational excellence, how we become more productive and efficient in our manufacturing, or organizational fitness, how we improve the way we work across the organization to better serve our customers and better leverage our resources. We are already making good progress on our delivery, as you will see on the next slide, which sets out progress in 2024 and priorities for 2025. My confidence in delivering on the opportunity ahead is rooted in the leadership team. Most recently, Stuart Roby joined us as Managing Director of Watson-Marlow after I asked Andrew Mines to lead ETS.
This new team, with over 50% being either new or new in role, has a blend of a deep understanding of the group, but new ideas and an experienced external perspective to go alongside that, all of which will support our execution. Now, I'll summarize the progress we're making in these early days executing on our strategy, starting with the operational priorities and commercial excellence. In 2024, we increased the number of customer-facing sales colleagues. In STS and Watson-Marlow, our sectorized sales focus helped us grow well ahead of IP, increasing market share in those target sectors. We're strengthening our position in new high-growth sectors by leveraging regional teams' expertise to support colleagues, for example, from China in the electric vehicle battery sector, as our customers explore new manufacturing locations.
We launched new products, for example, in Watson-Marlow with WMArchitect, supporting self-generated solution selling in the BioPharma sector through bespoke approaches to connecting disparate systems along the fluid pathway. Qdos H-FLO, a chemical metering and dosing pump, which further expands our addressable market in process industries. I'll shortly also give you an example of how we're growing MRO sales from our installed base in STS. In 2025, our focus is on maximizing the productivity of our direct sales engineers, including increasing customer-facing time and the number of customer visits to drive growth in a weaker macroeconomic environment. Now, in operational excellence, during 2024, we started delivering procurement savings within and across all three businesses and will continue to increase those savings in 2025. We also consolidated our manufacturing footprint in the U.S.A., closing a number of smaller manufacturing sites in ETS and Watson-Marlow.
This represents the initial steps to optimize our footprint while retaining regional manufacturing that is critical to delivering high levels of customer service. Our focus is on mainly smaller sites or where we manufacture more standard products. Earlier this year, we announced the closure of our STS facility in Mexico, with production moving to the U.S.A. and we are putting on hold the previously planned construction of a new Gestra facility in Germany. As we make progress, we will have greater flexibility in how we manage our manufacturing footprint, and we will continue to review how best to optimize and extract value from our fixed capital. Moving to organizational fitness, in January 2025, we initiated a series of organizational changes. We're reducing our management layers and consolidating activity, which can be better leveraged across operating companies regionally.
For example, our product technical expertise, our field servicing and repair teams, and our digital services skills. These have been built individually in larger operating companies and will now serve as a center of excellence for all local companies in the region based on where the opportunity is greatest. These organizational changes are being supported with common processes built into our systems. Turning briefly to ERP, during 2024, we moved from three separate business-led programs to align around a single global common design. In the second half, we successfully completed the ERP implementation at Thermocoax in France. This project was already underway, but allowed us to test key design principles ahead of developing our common approach.
I am really pleased with the pace at which we have moved to execution across our operational priorities, and our restructuring is the first significant activity of this nature that we've ever undertaken across our group. Louisa talked you through the financial benefits, which are material and will support our investment in future growth. What I want to emphasize are the benefits of building a simpler, more agile, more scalable organization with simplified internal processes and increased customer-facing time for our sales colleagues. This slide is a deeper dive into two important areas that shaped our performance in 2024. Earlier, I spoke about the challenge facing STS in China as customers slowed the expansion of manufacturing capacity, with these large projects accounting for 60% of sales. I think it's helpful to explain how we've been reshaping this business as an example of commercial excellence and driving growth in MRO.
Taking advantage of expertise from within STS, China has now completed a mapping of its significant installed base targeting the most attractive growth opportunities, added MRO-focused sales engineers in larger regions where the opportunities are more concentrated, as well as developing and deploying training for large project-focused engineers to identify and self-generate MRO solutions while also realigning their incentives. As a result, MRO sales growth in China in 2024 was in the double digits, and we are expecting a further year of double-digit growth in 2025. Of course, MRO comes at more attractive margins being funded from customers' OpEx rather than CapEx budgets. The second example on this slide is of operational excellence focused on our Ogden plant, where throughout 2024, we have been focused on increasing shipments against a strong order book. As you know, improving manufacturing throughput is a critical step towards delivering a 20% margin in ETS.
As a reminder, Ogden manufactures large low-voltage and medium-voltage heaters, and these also support our decarbonization solutions. On the slide, you can see a photo of a recently shipped triple-stack heater for a mission-critical application on a chemical customer's site. It is one of only a handful of such heaters manufactured in the past decade, and we have made almost all of these because of our reliable performance in the field. Our Ogden operational improvement started with leadership changes in ETS and the local team. We're focused on improving key processes to meet customers' bespoke requirements without compromising efficiency and lead times. These include implementing controls over complex designs, improving the interface between sales, engineering, and manufacturing that created past production challenges.
Addressing this quote-to-cash process shortens lead times in design engineering, improves resource planning and production scheduling, and enables us to better manage customer change requests, thereby delivering higher throughput and improved efficiency. After several years of flat output, we saw material improvement in shipments. We delivered a double-digit increase in Chromalox sales, with Ogden shipments increasing by close to 40%, leading to an overdue backlog reduction of over 20%, as well as improved margins through operating leverage. During 2025, we expect further improvements. Separately, the expansion of the Ogden facility specializing in the manufacture of medium-voltage solutions is progressing well and remains on track for completion during 2025 and will help to further reduce lead times. Let's turn now to look briefly at some of the areas on which we are focusing to drive that future growth.
These are longer-dated investments delivering multi-year returns, and we've made good progress in 2024. First, digital and services. We're augmenting customer relationships by being even more connected with them, both physically and now digitally. In this way, we walk the plant and we walk the data. In 2024, we increased paid-for digital customer connections to over 10,000 assets, principally STS steam traps and heat exchangers across 1,000 customer sites. In Watson-Marlow, we successfully trialed our machine-learning-enabled Bredell connected pump in the wastewater sector, predicting blockages in the fluid path. As an example of the return on investment, an international brewery customer asked us to help resolve significant steam loss. Typically, customers complete steam trap surveys annually, meaning failures remain undetected for long periods. Through our ecoBolt steam trap monitoring, we see process performance and energy consumption and detect failures in critical operations.
Every failed trap costs over GBP 3,000 in energy loss and 13 tons in CO2 emissions over a year, and we were able to replace those traps within weeks, growing our MRO sales. You see how we've become even more knowledgeable on our customers' processes, increased the frequency of engagement, and thereby are able to anticipate their needs. Our work with this customer has also led to additional solution sales beyond these steam traps. Turning to the progress we're making on our decarbonization opportunity, which is delivered by combining complementary expertise from STS and ETS to significantly expand our addressable market. The focus of our investment here is on technology and capability. During 2024, we continue to refine our proprietary technology to decarbonize the generation of steam through electrification and ETS technology, launching additional pilots.
We expanded our solutions portfolio with an investment in emerging technology, high-temperature heat pumps to generate steam. We also made good progress in developing new resistive heating products that operate at higher voltages and higher temperatures. Similarly, we finalized the design of our decarbonization operating model, which you will recall is a critical first step in ensuring we have the appropriate resources and structures in place to leverage our STS and ETS resources effectively. In 2025, in both digital and decarbonization, we will continue with our proof-of-concept pilots. Now, bringing everything together, I would summarize our performance in 2024 as follows. We met considerable external macroeconomic headwinds that were facing us by focusing on the controllable to deliver organic growth well ahead of IP, with margins in all three of our businesses in line with our expectations.
We are a new leadership team that has come together well, developing our growth strategy, setting our financial objectives, and aligning the organization behind our operational and investment priorities. I'm proud of our colleagues who have risen to the challenge as reflected in the results, including delivering on our guidance for the second half of 2024, increasing manufacturing throughput in ETS, delivering growth well ahead of IP in STS outside China and in Watson-Marlow process industries, and in the first part of 2025, we've taken early action on restructuring. I am confident that we have a clear and executable plan and the right team focused on delivering it. Turning to 2025, we're not expecting a meaningfully improved trading environment, and as I've said, we're taking a cautious view on outlook for IP.
Against this backdrop, we're confident of making further good progress this year as we continue to focus on the controllable. In 2025, we anticipate organic growth in group revenues consistent with that achieved in 2024 and well ahead of IP, and group adjusted operating profit margin to be ahead of the currency-adjusted 19.6% margin in 2024, driving mid-single-digit organic growth in adjusted operating profit. Through our together-for-growth strategy, we're continuing to build the platform from which we will deliver on our medium-term financial objectives and long-term compounding organic growth at attractive margins while also making progress in 2025. Thank you. We're happy to take your questions. I'll start at the back. Jonathan.
Yes. Good morning. Hi. It's [Jonathan Herman Barkes]. I just have three questions, if I may. Firstly, just on BioPharma, and apologies if I've missed it, but in terms.
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Yeah. Firstly, the question was just on BioPharma, and apologies if I've missed that. In terms of that order recovery that's coming through, can you just give us a feeling? Is that geared towards the aftermarket, or is it geared towards your original equipment? If it's geared towards that aftermarket, can we assume that we're going to see a mixed effect in terms of the benefit to the margin from Watson-Marlow going forward from that? That was the first one. The second one was just in terms of that new capacity you're putting on or putting in at Ogden in terms of that expenditure there.
You're calling out it's obviously a drag on the margin. Can you just give us a feel for how long that drag will sort of persist? Essentially, when does that facility get to an acceptable level of capacity utilization? The third question was just on steam. Obviously, you're calling out China as being tough, but the other two areas outperforming. Can you just talk a little bit about U.S. steam and what you're seeing there, maybe the growth rates? Obviously, within that, you're looking for more of a direct sales approach relative to through distributors. Can you just give us an update about how that's coming through and what effects that's having, please? Thanks.
All right. Thanks, Jonathan. I'll take the first and the third. Louisa, maybe you take the second.
In terms of BioPharma recovery, we're starting to see a recovery in new order intake across the board. Often, the way to think about the leading indicators in the BioPharma space is look at the long lead time items that are necessary for capacity expansion. Quite often, you'll see that in our Flexicon systems that are shipped out of Europe. We're starting to see a higher level of inquiries for those products, largely often in fill and finish in BioPharma, because there's a kind of a 12-month, 18-month timeline lead time for delivery of those systems. We're seeing that pick up. We're seeing demand for pumps picking up, and that's quite often the second lead indicator, which is a little bit nearer term.
You don't have to put those orders in so far in advance, but it's a good indication of higher activity in customer sites and probably some existing footprint expansion of capacity. The third area we look at is consumables, as you described, Jonathan, which is about the extent to which those processes are running at full capacity and people are starting to churn through single-use tubing, for example, or replacing pump heads. We are seeing a pick up in all three of those areas. Okay? We're starting to see that BioPharma order intake reflect what we always expected, which is this really strong underlying growth that remains in the sector. We're particularly seeing the pick up in end-user customers. I know there's a lot of disclosure from the larger OEMs, which you'll naturally be very focused on and looking at.
Demand from the larger OEMs is more volatile. It is also more geared to capacity expansion quite often than our business. We saw a lot of month-on-month volatility in large OEMs last year, but we are seeing order pick up in large OEM demand as well. It is across the board. It is going to take some time for those orders to recover back to where they were off a low base. That is why we have always guided to a more gradual recovery in BioPharma, and that is what we continue to stand by. Do you want to take the Ogden point?
Yeah, sure. Just a reminder that that plant should be coming online sort of around July this year. The order demand continues to be strong. We are not going to talk about how much of that cover is there, but it is a positive trend.
We think, Jonathan, it'll probably be tempering the margins through 2026. Do not forget that one of the key drivers of getting to our 20% margin for ETS by 2027 is that throughput and productivity and the volume leverage from those assets. It will take a bit of time for them to get used to that new facility. We are really encouraged by what we are calling our end-to-end quote-to-cash sort of revitalized process. We have got the teams actually looking at everything from the point at which the customer gets the quote right the way through to when we collect cash, which has not been our best performance at Ogden in the past. Actually, that should mean that as we bring new stuff in, the flow should get better and we will have fewer bumps along the way.
Okay. Third question. You are right. In the U.S., we have been looking to drive demand more directly with our customers. Now, I'm going to introduce a nuance here. There is a difference between direct sales and driving direct demand. I'll explain what I mean by that. We have a number of strategic distribution partners in the U.S. with whom we work very closely to visit the end customer. What we do through that is bring our solution selling to bear. We walk the plant, we identify the opportunities, we help the customers understand how they can optimize their processes. How they then place those orders, I think we can afford to be more relaxed about. If they want to place them through the distributor because it makes sense for them to do so, I think that's okay.
Where we have those strategic relationships with distributors, we are thinking about how we share the value that is generated because they are introducing the customer, we are bringing expertise. There is value on both sides. This is about growing the pie rather than sharing an increasingly smaller pie in different proportions. How do we grow the total size of the pie? What I think is brilliant about what is happening in the U.S., and we have particularly accelerated this journey over the course of 2024, also under new leadership in the U.S. business, is that we are now looking at cogeneration, so both direct sales and working with those distributors in the way I just described. That is around about half of the total sales in the U.S. Remember, direct was about 30%, as in direct sales.
Now, cogeneration added to that gets us to a total of about 50%. We are going to continue to, I think, grow that part of the business as we build more of these strategic distribution relationships. Remember, distribution business is good for us because our products are critical, emission-critical processes. Our customers need to be able to get hold of products quickly. If they cannot, they will not use our products. Distribution is good because it helps us hold that inventory around a country as large as the U.S.A. The output of that is we have seen really strong growth in the Americas, in STS, and particularly in the U.S., and we expect that to continue. Thank you. Andy.
Good morning, both. It is Andrew Douglas from Jefferies. A few questions, please. Can we start with STS in China?
I'm just trying to plot a path getting China in STS back to positive territory. It looks to me like the China declines accelerated in the second half. It looks to me like OE was down about 25%. Are we expecting MRO to catch up in terms of the growth rates to offset that, or are we expecting the OE declines to slow or a bit of both? What does that mean for timing in terms of China? I'll do one at a time.
Okay. That's very helpful. Thank you. I'll start on China. Louisa, you add. The first thing to bear in mind, as I said earlier, is that the expanded and refurbished demand's about 60%. That's the bit that we're seeing the contraction in. It's going to take time to rebalance MRO and expand and refurbish.
We saw double-digit growth in MRO last year. We're expecting it again this year. That will help bring those two into balance, probably during the course of 2026. Okay? The second thing is MRO will continue to grow as we build that platform and that muscle in China. The other thing that will happen is expand and refurbish will start to stabilize and flatten out and probably get back to growth at a point. When you put all of that together, that's what gets us back to growth in China. Not ready to tell you exactly when that will be, but you get a sense of we're feeling a bit more optimistic about 2026. The other thing I'd say, which we didn't mention before, is that we have taken cost action in China.
We have addressed the cost base, but making sure that we are reallocating resources towards MRO. That's number one. Number two, just a reminder, MRO margins are higher than expand and refurbish margins. From a profitability perspe ctive, this is healthy for our business.
Nothing to add.
Second question is on ERP. I appreciate that this is a big thing, and you've got to take it sensibly. Is a common approach across the three businesses actually appropriate, given the three businesses are different? Can you just give us a rough approximation of the cost of this whole ERP system over the next however many years it's going to take? It feels to me like it's going to be a big number.
I'll ask Louisa to take that question.
Just as a bit of context, you'll remember at the capital markets day, I talked about how our organizational structure helps us with ERP implementation. I just want to say it again so everybody's clear. For me, ERP is not everything everywhere all at once. We don't need to. Because of the nature of our organization, you saw what we just did with Thermocoax France. Okay? Delivered successfully, minimal disruption, and at a reasonable cost within one of our businesses. We didn't have to do Thermocoax as a whole. We didn't have to do ETS as a whole. We didn't have to implement across a group as a whole. Because we can do that, we can spread the cost, and we can spread the risk, the impact on our operations of implementing ERP over a long period of time.
In all honesty, the way I think about ERP is that it is an ongoing cost of doing business, not a large one-off project. We will have a cost every year for ERP. You know what? When we get to the end of this one, we will probably start again at the back end because it will be time to update systems again. It is also generating returns. For example, from what we have done now at Thermocoax, we will drive increased productivity and efficiency from that facility as well. That is how we will get the returns as we go. Do you want to talk a bit about the global common design, Louisa?
Look, first of all, I would say that you talked about appropriateness. We think this gives us maximum optionality. It is not just about the business model.
It's about common security and sort of common data environments, which give us some more flexibility. If we think about the approach for each of the businesses, we really are trying to, well, this is not about a system. This is about how we do work. This is about changing the way we work. That's where the benefit comes. Standard functionality, standard ways of paying invoices, all of that stuff, that's a no-brainer. Actually pushing into manufacturing. There are lots of companies that do manufacturing with standard out-of-the-box ERP things. We are no more complex than other companies. We are really pushing ourselves to be, where do we really need to be different? We will respect where we need to be different, but we are taking quite a hard edge on maximizing the returns from what will be a big number.
You're probably in the three-digit million type environment. To Nimesh's point, we are spreading that so that we are minimizing risk and minimizing capital expenditure. I can't emphasize enough the appropriateness comes from us getting sort of more balanced about how we do things in a similar way rather than this system. Are those costs for the line or below the line? At the moment, our common design cost for 2025 will be on CapEx. The contract will determine where we put them, but at the moment, it's in the CapEx numbers.
Last one from me, and then I'll come back.
Just to add to that, sorry. Just put everyone at ease. Those costs are already factored into our CapEx guidance and to our cash conversion guidance that we gave at the capital markets day.
Okay, cool.
Just in terms of costs going back in, you talked about GBP 15 million-GBP 20 million. Is that the overall number, or do we have more going back in 2026? I appreciate as volume recovers, you'll put costs back in, but this is more of a specific cost number. That's it, and I'll come back.
The investments going back in. We are broadly balancing the investments as the operational improvements come out across the areas that we've talked about today: digital, sales, engineer effectiveness, target zero, decarb, and operational improvements. There will broadly be imbalance, but they're not going to be perfectly imbalanced. You saw from the medium-term bridge, it's 150 basis points over the medium-term savings with 100 basis points back to investment. We'll get some different balances. We've got a bit more of the benefits staying in steam in the short term.
Broadly, I would say one-to-one. From a modeling perspective, in the short term, it does not.
I think Andy is asking about the comp. You said GBP 15 million-GBP 20 million. You are talking about the variable comp coming back in.
Oh, I am sorry. I thought you said 15. I thought you were talking about the investment. I am answering a completely different question. What do you think?
That was a helpful one any way.
Sorry, can you repeat the question? 15 to.
The variable comp, is that going in 2026 as well, or?
Yeah, it will be in the base. Essentially, I see this as you have got that variable cost coming back, and then you have got the procurement savings in the base to cover it.
Okay. Thank you.
Not listening.
Morning, guys. Lush Mahindra Raja from JP. I think I have got two or three.
The first is just on ETS and sort of in Chromalox in particular, because you talk about the backlog coming down 20% in the year. I guess, I do not know how you sort of define it, but how much further has that got to come down to get to normalized levels, whatever normalized is? I guess how much of that is in your sort of mid to high single-digit guidance for ETS growth? I.e., is that guidance just underpinned by the Chromalox backlog coming down, and there is not really much in there for semis or sort of underlying growth? Yeah, that is the first question. I presume Ogden will help absorb some of that as well. Take them one at a time, or.
Okay, sure. Thanks for the question.
We are driving a reduction in the overdue backlog in particular, and therefore bringing our backlog closer towards a more normalized level. A backlog or an order book is a function of two things. It is a function of order intake, new order intake, the level of demand that exists, as well as the pace at which we ship. The other thing we are seeing here is really strong order intake, right, driven by the drive towards electrification that we have been talking about for a while now. I am not worried about a lack of demand being able to continue to drive ETS growth. That is not the thing that keeps me up at night or keeps any of the team up at night. In terms of what is driving the ETS forecast for 2025, it is that operational improvement. We have put less weight on the Semicon recovery.
We have seen that in the fourth quarter of last year, picking up in terms of orders. I dare say we will continue to see, I hope we will continue to see a further recovery in Semicon orders during the course of this year. Of course, a bit like BioPharma, it's coming off a low base, but we're not overly reliant on that to deliver our guidance.
Okay. Thank you. The second one is just a follow-up on ERP. In the ETS statement, you talk about the implementation in Thermocoax in France, been a bit of a margin headwind in the year. I guess exactly what was that? Is that just disruption from switch to ERP? How should we think about that as you roll it out to sort of the bigger sites and across the division?
Is that a headwind we need to factor in and sort of the phasing on t hat?
The point is that we put ERP in Thermocoax, one instance, one site, normal sort of level of cost for that type of implementation. We have called it out as one of the dampness to margin in 2024 in equipment heating. It is small beer. It is enough to be noticeable, but it is the law of small numbers. As you roll that into 2025, it is mostly the CapEx and the depreciation that will be coming back into 2025 for Thermocoax.
Just to be clear, it is not production disruption. It is just the cost of implementing ERP that impacted margin.
That is sort of baked into your sort of investment guide.
It is. Yeah.
Okay. Yeah. Thank you.
Thirdly, on SDS, I think you talked about maybe pricing normalizing a bit this year, just given sort of the levels we've been at recently. I guess when you talk about, is that sort of back to the sort of 3%? You talked about the CMD in terms of the historic pricing and that.
Sorry, I'm trying to answer the question. Your question is, how much did we increase prices by?
In 2025, I think you sort of talked about SDS pricing maybe normalizing a little bit. Is that sort of back to 3% that you've done historically?
Back in line with our weighted average cost inflation. Yeah.
Okay. Thank you.
No problem. Shall I come to the where's the microphone? You've got it. Shall we go to Maggie and then pass the microphone to the front? Do you want just? Thank you.
Thank you. I am Maggie Schooley from Redburn. I just have one question. In ETS and the order book, you called out that you had some repricing for inflation this year. You had to take it down. You were not able to reprice for inflation. Given the length of that order book, do you anticipate any further challenges on repricing portions of that order book, or do you think that has cycled out? Just how we should think about this this year, and is that already factored into your margin guidance?
Yeah. Okay. Factored into our margin guidance, number one. Number two, you are right for orders that were overdue, cannot go back to the customer and reprice for the inflation. We have been shipping against those orders. That is why you see less of the impact than you might expect on very high growth, but in terms of margin improvement.
We've got some more to go during the course of 2025, but obviously, it's declining over time. Just lastly, sorry. You've talked a lot about digital and digital driving growth. Can you give us a little bit of color on what you've seen, at least as we've entered the first half of the year, about that rollout of digital and how it's galvanizing orders, or is it not? Is it still taking a long time? How we should think about that as a leader in getting your order growth? Good question. Digital is driving growth, and we expect it to drive even higher growth in 2025 in steam. Look, when we talk about outside China, we've got that specific headwind that Andy asked about earlier. Outside China, we're looking at in steam, 4% growth, right, in an IP environment of 0.8%.
How do we achieve that huge outperformance versus IP in a difficult environment when we're in every country, in every sector around the world? We're not immune from IP. The answer is through things like that, through things like being better engaged with our customers, having better data, better serving their needs, delivering the solutions. That's how we do it. Digital is a tool that helps us do that. In digital, what we see is we see, one, we see revenue from the paid-for connections, but that's small. What we really see is the product pull-through, like the example I gave around MRO. We are seeing digital help drive our growth. What we're able to do when we really scale up those digital platforms that we have, add further connected products across our three businesses, will be even greater than what we're already achieving. Thank you.
Mark's been very patient. I'll pass it down here, and then we'll go across to the row. Thank you, Mark.
Thank you very much. Broad one, then slightly more specific. Obviously, we live in interesting times. U.S. trade policy seems to be made up every morning and changed by tea time. I fully understand why you can't give us an idea on tariffs, but presumably what this is doing is impacting your customers' CapEx decisions and their ability to decide where to invest. Are you seeing any of that on the CapEx end of the business? I guess the specific bit is you called out South Korea as a new area of weakness. Is that because that's another, like China, more CapEx-focused market for steam?
Okay. Yes, there is a high level of uncertainty, and it's evolving every day.
We are seeing an impact on our customers' decision-making processes. At the moment, what we're seeing, I would characterize probably as deferred decision-making. No surprise there. While they wait to see how some of these conversations play out on the global stage, that is unhelpful. It is unhelpful to the IP outlook. It is unhelpful as a driver of our business. I would also remind you that if you look at our business overall, we're about 15% from customer CapEx budgets, 85% from OpEx budgets. One of the advantages we have is that even when customers are saying, "Okay, we might hold off on making the CapEx decision, we still need to drive either cost efficiencies or more throughput in our existing footprint," we can help them with both of those. That is where we're focusing our efforts.
What I talked about as happening in MRO in China is actually happening across the steam business to make sure that we are leveraging digital, that we are identifying the MRO opportunities, that we are driving growth in MRO, and that we are bringing our solution mindset to MRO as well, much in the way I described with that international brewing customer. In terms of South Korea, look, it was December when I turned on the TV and I saw what was happening in Korea, and we spoke to our teams locally and tried to get our arms around very quickly the impact there. The Korean business is interesting for us because there is a very strong EPC presence in Korea that serves not only Korean industry, but actually globally as well, other customers. The impact on Korea is a function of the impact of CapEx.
It's a function of their global support, particularly oil and gas in the Middle East. It's a function of what's happening domestically. It's different to China, right? It's not as heavily weighted as China. We will see an impact in Korea as a result of political instability locally and probably more broadly because of the CapEx impacts. That's built into our guidance.
Hi, it's Rory from Oxcap. Thanks for taking my questions. I've got two on margins, and Louisa, it might be the one that you were wanting to answer previously. If we look at that GBP 35 million of restructuring going on, 40% roughly, you think, this year, would you be willing to put a number to 2026 and 2027, how that phases out? Is that 100% for reinvestment, or is there any kind of hockey stick on margins to come from that?
I'll pause there.
Thank you for giving me an opportunity to answer the question that I wasn't asked first of all. We said 40% of the 35 this year, broadly, the rest of it comes through next year. There's a little bit of stuff coming through later, which are associated with some of the longer-dated manufacturing actions. As a rule of thumb, it's 40/60. In terms of our investment, again, broad brush, over the medium term, 150 basis points out, 100 back, timing of which depends on where we think we need to be most agile to drive the most return. Again, as a principle, there are some things we're trying to front-load. Nimesh has talked about digital sales engineers needing a couple of years to get up to full effectiveness. We've got off the blocks quickly with the restructuring.
We want to continue to do that with investment. You'll appreciate that we don't want to give a year-by-year pattern of exactly where we're going to invest. We'd like to retain that agility.
Just bear in mind, the medium-term guidance that we've given is our way of trying to look through some of that year-on-year volatility. We will get to, over the medium term, 22%-23% margin. It immediately gives you a sense of where we might be in 2026. We're not going to be at that target. We're going to be below that target, but we're going to make progress towards it, right? The same, we've given you guidance around the growth we expect in all of our businesses as well.
Understood. Thank you. It sounds like 2027 maybe is a year of improvement.
Just on that, and within ETS, we've talked about this second half ramping of the medium voltage new capacity that's coming online, as well as the increased throughput in the low voltage stuff. How much of that medium voltage order book was done under the old regime when we talk about quote to cash and the sort of changes that you've put in there? I.e., do you have visibility on the margins in the order book for that medium voltage piece? I guess the question there is, can we expect linear improvement in ETS margins, or will it be lumpy towards that 20% in 2027 target? Thank you.
You want me to do it? I think I would say most of that order book was done from old regime, but of course, there's transition.
Look, the team used the phrase that 2025, particularly the second half, because Nimesh only made the management changes early in the second half, it was about being effective. 25 and 26 is efficiency and profitability. We will see more, but we do have some things that I would just like you to caution on. I have talked about Rocky Mountain, the volume leverage when it comes. Sorry, I have done it again. The New Austin, that is our project name for it.
That is the mountain and the Rocky Mountain.
Also, just while I have got the floor, we did exit a 15% growth in ETS as a whole, obviously underpinned by process heating efficiency and that uptick in Semicon. Actually, the comps in 2023, the Chromalox facility was not performing as it should in 2023. You have got a bit of an uptick in that growth rate.
That is why we are guiding to mid to high figures rather than a continuation of the 15%. Just encouraging to think about that.
Thanks for taking my questions.
Thank you. Come over this side.
Thank you, Mark from RBC. Just actually a slight follow-up on the brief answer to Louisa's question on pricing and steam. I suppose steam, at an apparent level, had a very low organic drop-through on growth last year. Is that just because actually also organically sales or volumes were down in the year? I am assuming pricing was more than 1%, but maybe not. How do we think about that price-volume mix for steam in 2025 as well with that sort of low single-digit growth? Does that mean pretty flat volumes again in steam?
Yeah. Thanks, Mark. Sorry. A couple of things happening in steam.
Why was the drop-through lower in 2024? Number one, as we both said, the temporary cost containment that were put in place in 2023, we reversed in 2024. For example, investing more in future growth, building on our sales capability, all of those things happened in 2024. You are seeing that effect reducing the growth. What we are essentially calling now with variable comp is a further effect in 2025. The second thing is, I think you are right. If you look at the business overall, when you look at the price-volume balance, because we have 1% overall growth for steam, you would reach the conclusion that volume is down, and that is not unfair. However, you have to strip China out of that because in China, volume is down for the reasons that we have explained. You have to look at the 4% excluding China.
You'll see volumes are actually up.
Taking that the other side of it in terms of Watson-Marlow, where apparently organic drop-through was very strong. It feels, correct me if I'm wrong, that that 30%+ margin target is more about operating leverage probably than the other bits of the business. Historically, that was actually pre-COVID, pretty consistently more at 32%-34% type margin. Is there any structural reason in your mind that the business has changed since then? Is it just a case of we're just waiting for leverage on growth? In that context, what is a normal drop-through level for that business?
Okay. It's a high-margin business, so you're right. The drop-throughs are higher.
As you would imagine, in a few years where we've seen weaker demand from BioPharma and expected the weakness to continue for a little while, we have addressed the cost base already. It is now highly geared towards sales growth. The margin is highly geared towards sales growth. Our target is that 30%, getting back to 30% in Watson-Marlow. Why is that the right target? It's not so much that anything has structurally changed in the business, but we did invest a large amount of capital in going all the way back, a new plant for Aflex in Huddersfield, a new plant for BioPure in Portsmouth, a new plant for the U.S. in the shape of Devons.
What comes with that is the additional depreciation on all of those investments, whereas the previous plants were old, had been there for a long time, very low depreciation costs. That is also impacting the margin. We are comfortable with the guidance that we have given getting back to 30%.
A really small question. Just in terms of that now, GBP 40 million central costs, do you think that is a sort of stable level for the future now in terms of that specific line, or does it move around with some of these other factors?
I think, yes, it might move around at the edges, but I think it is fair. I do not want to give guidance for 2026 and 2027, but I think the uptick is because we are sort of nurturing some of the central investments, particularly digital, whilst they are in that sort of first phase.
We talked about MIM at the capital markets day. We'll probably see some of that early-stage investment being carried to corporate.
That's what we mean by together for growth. You can do these things much more efficiently when you do them together than when you try and do them three times in three different ways. You get better people. You can leverage that expertise in a better way. You can build common platforms and not have to build three platforms. We'll figure out what we do at the center versus what happens in the business. That's what you're seeing is driving the increase in the central costs. Thanks. Just behind you.
Thank you. Martin Wilkie from Citi. A couple of questions on demand in a couple of areas. You obviously get exposure to traditional energy markets, both oil and gas and power gen, and also in decarbonisation.
Given what's happening in the U.S., but even perhaps in other areas, is that mix changing for you? Are you sensing that investments in traditional energy areas, whether it's in gas or traditional power gen in the U.S., is seeing lifetime extensions or expansion? Is that incrementally positive for you? On the flip side, are customer conversations on decarbonisation becoming more difficult? I mean, again, probably most U.S.-centric, but just keen to hear how you're seeing that.
Yeah. A great question. So roughly about 6% of our group sales is probably oil and gas. And that's good exposure to have. We are seeing growth in that space as a result of some of the conversations that are happening around the world. Equally, our specifically decarb-related business is quite small.
We have still got many, many customers, particularly in Europe, but also in the U.S., who are committed to delivering on the targets that they have set out some time ago and are thinking about how they do that using our products, using our expertise. We are seeing strong interest in our solutions, a building pipeline of opportunities, and good growth in our order intake in that space as well. At the moment, we seem to be doing well on both sides. The other thing I would say is, and something to bear in mind around decarbonisation, there are different reasons people make the decarbonisation decisions. Sometimes it is because they want to achieve their sustainability goals. When you are more efficient with your energy use, you also save money. There is an efficiency driver to make the decarbonisation investments as well.
I don't think this is binary, right? We want to do decarbonisation. We don't. Actually, it's just another way of looking at efficiency. We want to be more efficient with our energy. How do we do that? Thank you. Any other questions? Excellent. Oh, sorry. We'll go to the phones.
We've got one online, which is on capital allocation. Can you just remind us of your capital allocation priorities in the context of your dividend and deleveraging ambitions? Sure. Louisa, do you want to take that?
Primary focus is organic growth, progressive dividend. We are still keen on bolt-on M&A, where it makes sense for our product portfolio and then other returns to shareholders. Just on deleveraging, we're really pleased with the fact that net debt has gone down. We're at 1.6 x EBITDA, 1.7x last year. We did well on working capital.
We had a small working capital inflow this year. The team did really well on inventory. We will continue that focus. It might be difficult to do some large deleveraging in this year, 2025, because we have got to absorb the restructuring costs. We see potential for that in 2026 and 2027 as we start to grow the margin again. A team really focused on working capital. Some of the restructuring that we are doing, where we have talked about sort of clustering opcos, will mean we do not have to have stock in as many places. Hopefully that has some additional benefits as well.
Good. Thank you. Thanks, Matt. If there are no other questions, thank you for joining us today. Really appreciate it. Thank you for everyone on the webcast as well. We look forward to speaking to you all in the coming weeks and months.
Thank you.