Good afternoon, everybody, and welcome to Dover's 2019 Investor Meeting. I'm Andrei Galliuk, Vice President of Corporate Development and Investor Relations for Dover. Together with me here are Rich Tauben, President and CEO and Brett Sarafak, CFO of Dover. We'll begin the meeting with a presentation by Rich, and then we'll open the meeting for questions. This webcast will be available for replay on Dover's website.
Dover provides non GAAP information and reconciliations between GAAP and adjusted measures are included in our investor supplement and other materials which are available on our website. Our comments today may contain forward looking statements, and we caution everyone to be guided in their analysis by referring to our Form 10 ks for a list of factors that could cause our results differ from those anticipated in any forward looking statement. We undertake no obligation to publicly update or revise any forward looking statements except as required by law. With that, I would like to turn it over to Rich.
Thanks, Andre. Good afternoon, everyone, and welcome to Dover's 2019 Capital Markets presentation. Because the presentation is going to be webcast, I'm going to have to stick to the script here, so I'm not pointing the slides. When we get to the Q and A, it can be a little bit more interactive. So for those of you who participated in or listened to the presentation we made a year ago, we announced at the time that we'd be focused on shorter term tactical actions to be taken at Dover.
We also promised to report on our progress and come back the following September with a broader update on portfolio strategy. So here we are today. With that, let's turn to Slide 3 of the deck for an overview of the agenda. I'll begin with a short update on our progression towards achieving last year's objectives. From there, we will cover the output of our portfolio assessment conducted with the management and the Board of Directors over the last 12 months and our intention to align our external reporting with the new management structure.
This is followed by a broader and deeper assessment of the new business structure, including competitive positioning, sources of value creation and details and product and market exposures. I'll follow this with the key pillars of our strategy going forward, including operating model evolution, opportunities to create value on common business systems, our digital strategy and operations toolkit. We'll wrap up on margin improvement roadmap, balance sheet strength and capital allocation priorities going forward with some granularity around our inorganic intent by segment. So that's a lot to cover, and I suppose that some of you are disappointed that we have a presentation prepared at all, but have no fear. I'll do my best not to fill up our stern leave ample time for Q and A.
So moving on, we are building off a strong legacy at Dovin, clearly in terms of shareholder value creation and the portfolio is capable of producing attractive returns as you can see from the chart in the upper right. We're committed to extending this legacy and recognize that our journey for HEAR will be driven largely by organic growth, operational excellence and smart reinvestment and capital allocation. Of important note, the bottom right of the slide is our full year guidance for 2019 as updated at the end of the second quarter. We have not updated our full year guidance in this presentation, and any changes to guidance will be when we report Q3 in October. As I mentioned in my opening remarks, we have laid out some clear measurable objectives last September, and it's important that we close this chapter with an update.
We have delivered on our cost structure realignment, delivered healthy incremental margins and reinvested a material portion of our savings into initiatives that will contribute meaningfully to our future growth and margin improvement. The biggest concern we heard last year was that our organic growth was going to suffer due to SG and A cost reductions and the organization turning inward to deliver the cost savings. Through Q2, Dolby has delivered solid organic growth performance, as you can see on the slide. We have meaningfully invested in our businesses with a clear bias towards productivity and growth initiatives. I'll cover a few later in the presentation.
And finally, we have developed or we have deployed an integrated capital within the criteria that we had established, and we have a robust pipeline of similar nature. I'm pleased with this early performance. Our management team is challenged to deliver on some tough objectives. They accepted the challenge and by understanding the importance of building a culture of delivering consistent returns through the business cycle. It also gives us confidence that by executing our SG and A initiative that we have a road map for synergy extraction from our inorganic initiatives.
Here's an update on the specific margin improvement programs in Fueling Solutions and Food Retail businesses, which we announced last year. As you can see, we've made meaningful progress in DFS and expect to deliver 300 basis points in comparative margin expansion in 2019. The margin journey does not end here as there remains much to do, especially with our EMEA business, but we are very pleased with the focused effort of the management team and all the tools are in place to deliver accretive incremental margin beyond 2019. In DFR, we faced a much larger task with the impact of the demand cycle and a far more complex operational issue. The improvement journey from here will take longer, but we see a path to target profitability within 18 months.
I'll give some more detailed color on where we are in this project from an operations perspective later in the deck, but there are 2 important data points to consider. Market demand for the retail case and door product line has stabilized, and we see a clear path to exiting 2020 at our target objectives that does not require a significant increase in volume demand or product mix. Let's move on to Slide 9, please. So what have we done? So we've transformed the portfolio and positioned it for growth.
We have a long term track record of superior shareholder returns. Portfolio transformation over the past decade has transitioned from a pure HoldCo model and resulted in a stronger portfolio with more growth exposure, less cyclicality and more synergy from common ownership. We have completed an in-depth analysis of the portfolio, which confirms strategic and financial health and strong value creation potential for Dover's businesses, including 2 highly accretive turnarounds. Clarity on what businesses we like, how it will drive sustainable growth and how we add value as an enterprise and we intend to increase transparency around our businesses from here going forward with the adoption of the new segment structure in Q4. I've covered a lot of this in my opening remarks, but Dover has an established track record of significant value creation across different timescales through organic growth, portfolio changes and a dividend policy.
Move on to Slide 11. Over the course of the past decade, the portfolio has been rationalized significantly from 35 to 18 operating units, with a substantial portfolio rotation away from various cyclical end markets. The benefit of this rationalization can be seen by rerunning peak to trough revenue changes or trough revenue changes and organic growth for the legacy versus current portfolio. Clearly, the Dover portfolio is a far higher quality than the past and positioned to deliver consistent returns over time. As part of doing this work internally and comparing it to a peer group future revenue growth rates, it has become increasingly clear to us that Dover continues to drag some perception that its portfolio is highly volatile due to its legacy end market exposures.
This implied volatility manifests itself into a lower organic growth rate outlook compared to its peer set. It's our intent to close that gap today in this presentation. I'll start with a few slides from the total portfolio review, then we'll dive deeper into the individual businesses. Let's first take a look at the end market exposures. As you can see from the chart on the left, Dilma's portfolio participates in large diverse growth oriented end markets through defensible niche businesses that occupy leadership positions.
The exposure to commodity driven or cyclical markets is low and many businesses benefit from a robust secular trends around safety, compliance, productivity, consumerism and energy efficiency. More important than the end markets themselves is the critical nature of the products to our customers, the significant barriers to displacement, substantial reoccurring revenue and long product cycles. To further establish the value of the portfolio and the robustness and repeatability of its revenue streams, let's take a look at it split by nature. The current total portfolio is split 43% equipment as defined as standalone systems such as a retail fuel dispenser or a digital printer for textiles. 26% of the portfolio is critical use components or subcomponents sold to system suppliers such as compressor components or single use biopharma connectors.
The remaining 30% of the balance of the portfolio is made up of aftermarket parts, consumables, services and software. The chart on the left maps extremely well to the characteristics that Dilver finds attractive with respect to business model, customer exposure and financial profile and provides the baseline from which we will allocate capital both organically and inorganically in the future. Over time, we aspire to increase the share of component aftermarket and digital revenue streams within the portfolio. While we are doing the hard work of unpacking the drivers of the strategic attractiveness of our operating companies based on market growth, structure, customer concentration, etcetera, we are also evaluating this light of the financial performance and building outlook for value creation runway going forward. As you can see from the chart, all of the companies in the portfolio are projected to deliver above market value creation in a GD plus environment over time, largely as a result of their margin potential, low capital intensity evidenced by its 20% plus cash return on invested capital across the portfolio.
There are clear avenues for short term value creation, particularly in DFS and DFR that have been our priorities due to their scale in the portfolio and what we believe is a realistic performance objective. As mentioned previously, it is our intent to realize that value. Overall, there are many medium sized, highly turned businesses that need to be nurtured and pushed to steadily create value over time through market driven top line growth and incremental margin pass through. Several of the more mature businesses are embarking on business model changes, creating new avenues of growth by leveraging their established positions either directly or through their distribution channel. ESG comes to mind as an example that I'll cover later in the presentation.
There are several very interesting high growth, high value portions of the portfolio that we need to be aggressive in scaling both organically and inorganically. Our hygiene and biopharma platform comes to mind here. Portfolio assessment is a live process which we will revisit annually or if there is a dislocation in market structure. While the exercise does indicate there are no burning platforms, we will be prudent portfolio managers and reserve the right to be opportunistically active within the portfolio. As part of the underlying portfolio work, it has become clear that the current Dover business segment structure needed to change to accommodate our new managerial structure and operating model.
As such, effective with our Q4 2019 disclosures, we will be providing segmental information on 5 future segments from the current 3. We thought long and hard about this as the trend in multi industrials has been towards fewer segments, not more. The natural tendency is to be reticent about the granularity of the information disclosed, especially given how smaller companies can swing segment results with the reduced scale of the individual segments. An increase also implies an increase in managerial layers, which is not the case here. Ultimately, we have come down on the side that the operating performance benefits to be derived from commonality of business models, management, efficiency and decision making speed, clear performance benchmarking and better capital deployment efficiency or the concept of competition for capital between the smaller segments trumped the negatives.
We believe that our shareholders stand to benefit from the improved portfolio and performance transparency as well as the sum of parts valuation improvement potential. I am confident that benefit outweighs any ramifications of quarterly growth rate or margin fluctuations versus estimates at the segment level. Before we move on to the individual segments and their constructs, it's important to rebase recent top line performance from the data on Slide 11 to the future new segment structure and benchmark it to global GDP. Clearly, the portfolio has capability to deliver GDP plus to several segments participating in robust secular demand trends. So one last time before we move on to the segments and kind of the operating structure.
So one last time on growth, we have a clear formula to drive robust growth across a diverse set of businesses and markets. We will also employ this formula for determining business model fit in future investments. Here's where we are in the margin journey under future segment structure. We have made some real progress in margin accretion, especially since the spin of Apogee. We have line of sight on our larger near term opportunities for value creation.
And as you've seen from the quarterly results since last September, we are driving healthy incremental margin performance even without the SG and A cost reductions, which is a reflection of the healthy EBITDA margins in the majority of the portfolio. Our current trajectory gives us confidence that we continue to grind margins higher from a combination of top line performance, productivity programs, which I will outline further in the presentation. Let's transition here to the new segment structure and analysis of the competitive framework, business mix and highlighted potential areas for value creation going forward. Beauty and Solutions should be the most easily comped of our segments in terms of competitive landscape as a result of the fact that its 2 largest competitors are public companies and well understood. As you can see from the top right of the chart, we have an advantage position in terms of market structure and geographic breadth.
Our size and scale in the larger retail space allows us to pursue adjacencies beyond dispensers, which represent only 35% of revenue and hanging hardware into such areas as payment, outsourced services, vehicle wash systems and software. The business has a robust reoccurring revenue profile as a result of its large installed base with approximately 35% of the business being made up of parts, consumables, service and software. As a full service supplier to the fueling and convenience industry, our business has been evolving to incorporate suites of systems and software solutions for our customers covering payment and loyalty programs, monitoring services for inventory management, safety and compliance. Recall, the convenience store business derives profits primarily from retail, store and car wash, while fuel is low margin and mostly customer it must mostly for customer attraction. This dynamic creates significant opportunities for outsourcing and solutions that allow operators to focus on running their core retail store businesses.
The monitoring of below ground subsystems for safety such as leak detection, maintenance and inventory management across large retail franchises has been proven to deliver significant cost savings to our clients. These savings are from reduced downtime, improved inventory management and reduced maintenance and compliance reporting Our above ground solutions in addition to providing payment systems and software are able to provide loyalty program management, infotainment commercialization systems, workflow and back office software. The Systems and Software's business is $170,000,000 in sales and is largely dispenser agnostic, mostly recurring revenue in nature and growing at an attractive rate. We have material positions in both underground portion of the market that is largely driven by regulatory compliance and above ground and retail operations payment and loyalty. We expect system and software businesses to provide a significant runway of adjacent opportunities to create value above and beyond dispensers and have recently announced changes to our management structure to facilitate this transition.
Arguably, the least understood portion of the Dilver portfolio is the Pumps and Process Solutions Group. So I'll spend some additional time here. This is a $1,300,000,000 business made up of several premier platforms, all of which have leading market positions and provide critical engineered components to their customers. They have been grouped together due to the commonality of manufacturing systems, go to market strategies and significant role of intellectual property in the business. From a market structure and competitive positioning standpoint, all of the business participate in highly fragmented markets, providing critical components to high value systems and subsystems.
These businesses have large installed base, brand equity and most cases specification driven demand as well as wide distribution and geographic coverage. This drives reoccurring revenues at 30% of the total. Additionally, significant share of sales in these businesses is derived from stable replacement demand from a large installed base as opposed to 1st fit installs. For example, more than half of the demand for PSG pumps comes from replacing their installed base within a very loyal customer base averse to switching critical suppliers. In terms of end market exposure, our served markets are both broad and from an end user perspective and global in terms of distribution and revenue.
Our Pump Solution Group or PSG carries a range of positive displacement pumps, employing both rotary and reciprocating technology. With a market opportunity size of approximately $8,000,000,000 with the diverse end markets from petrochemicals and wastewater to food and beverage, there are significant areas to leverage the brand equity of our Black Mirror, Neptune and Wilden franchises. We have recently merged our hydro dosing pumps business under the PSG umbrella due to technology commonality and to give it access to building our position in hygienic applications. I'll cover CPC on the next slide. Our MAG business is a platform of technology offerings to the plastics processing and recycling industry, which is made up of polymer and extrusion pumps franchise, specialized industrial pumps, dryers, filters and pelletizing and recycling systems.
The market size of these specialty applications is approximately $3,000,000,000 It's highly fragmented, providing numerous consolidation and adjacent technology opportunities in pumps, systems and control software. We are particularly excited with the secular growth trends in recycling systems. Dover Precision Components business is made up of leading component suppliers predominantly in the HVAC, industrial compressor and power generation markets. Highly engineered fluid film bearings, magnetic bearings, compressor valve and packing cases and bearing isolators are co engineered mission critical components built to exacting tolerances. Our large installed base provides significant opportunity for maintenance, repair services and monitoring services.
Clearly, this is a premier growth platform to be exploited in the portfolio. It should be quite clear why this segment fits together. Mark and the Maja's well understood asset coupled with adjacency company digital print. Both businesses employ advantage positions in the respective market structures and revenue profiles by products are strikingly similar. With reoccurring revenue at 65% of sales and moderate levels of capital intensity, they are high value businesses in the portfolio and attractive platforms for both organic and inorganic investment.
Both businesses have different paths to future success and value creation as a result of differences in competitive framework and scale, but it is clear that there are significant opportunity to leverage the commonality of the 2 platforms operationally in ink production, consumables distribution, service and training, in short, DDPS runway to leverage the large global footprint of MI to expand its global reach at a low marginal cost. Dover Digital Print is a combination of premium textile digital printer manufacturer MS proprietary ink supplier JK and color management software Caldera. DDP has been successful in establishing its position at the premium end of a $1,100,000,000 textile printing market growing at a CAGR of 13% since 2016. Recall that Dover has built this platform through a series of acquisitions in 2014 2015. With the launch of the Mini Lario platform this summer on the heels of market success seen by the industry first industrial scale Lario printer and progress in bundling together printer and ink solutions, there is significant value creation opportunity for DDP.
As the TCL of large single pass high speed digital printers become increasingly recognized from multiple color applications in textile manufacturing, it's expected that the market penetration will increase and our product line will be extended in other textile production adjacencies. Services and Software are increasing focus of the Imaging and ID platform as the business is diversified from hardware and consumables into total solution providers. For instance, Mark and Mimage has 17,000 installs of its Colo software that helps customers significantly improve the efficiency and quality of their packaging lines. The total software and service business is approximately $100,000,000 and growing nicely, and this is a significant area for both organic development and inorganic opportunity. Moving on to Slide 26.
The Engineering the Engineered Products segment is a collection of well established industrial businesses with leading positions in the respective markets. If I refer you back to Slide 16 in Adecco, I would call your attention to the fact that this group of businesses has delivered the best organic growth rate of the 5 segments from 2016 through 2019. The segment is made up of 2 large positions in VSG and ESG. Both are market leaders with long standing market positions, large installed bases and in the case of ESG, global presence and footprint. Coupled with the smaller niche businesses of TWG, these businesses have commonality in their respective industrial footprints and processes that will be leveraged from an operational and supply chain perspective.
OKI, Distaco and MPG, leaders in the respective niche markets of adhesive dispensing and soldering solutions, material handling solutions and aerospace filters and switches have been brought together under common management to accommodate the uniqueness of the respective operating models and to extract synergy savings and to develop unique growth pathways. Despite being viewed as industrial assets, both ESG and VSG have begun to leverage their advantaged market positions to pursue emerging and adjacent digital businesses. In the case of VSG, with the acquisition of Third Eye in 2016, the business has begun to aggressively build out a digital platform encompassing autonomous handling, asset and safety monitoring and fuel and contract compliance solutions. This suite of services has been proven to generate significant ROI to our waste tolling customers. It also provides growth pathways for us to pursue in adjacent fleet types.
The 300% growth rate in SaaS software and hardware is impressive and it's still early days, but we are very encouraged by the ramp and adoption rates. In VSG, we are leveraging our significant installed base, brand recognition and scale of distribution to enter into the data capture and ADAS calibration. In cooperation with our Dover Digital team, we have deployed cloud services gathering valuable data from cars handled on DSG equipment. As auto is becoming increasingly guided by sensor technologies, the calibration and servicing of driver assistance systems in the repair shop is an interesting opportunity to be exploited. When we look at the relative market positions of the 4 businesses in the Refrigeration Food Equipment segment, it's clear that they are advantaged in their respective markets.
Food Retail and Belvac enjoy large installed bases, providing spare part revenue streams and short cycle replacement as well as refurbishment opportunities. Swept is one of the worldwide leaders in brazed plate heat exchangers, a submarket size of $800,000,000 in the greater $8,000,000,000 heat exchanger market. Is winning share versus competing in older technologies because of its superior operating efficiency performance and adoption rates driven by environmental regulations. Swept is truly a global manufacturer with a manufacturing footprint in EMEA, NAFTA, Asia Pac, making it well positioned to supply the growing consolidating HVAC industry. We have been investing in the business recently, including capacity expansion, productivity programs and line extensions to ensure that we have the scale and cost possession to meet this secular trend.
Delvac is a high return business with a large installed base providing for 40% plus revenue stream of maintenance and spare parts. The new build portion is tied to can making capacity expansion and CapEx cycle, which makes the business inherently lumpy. In the past couple of years, Belvac has been in the unenviable position of the tail wagging the dog, so to speak, as global can making has not been at a capacity build cycle. We believe this is going to turn around as can making capacity appears tightening, and we believe the secular shift trend from PET bottles to aluminum cans due to environmental concerns. This trend is in early innings, but is becoming pronounced.
Most recently, Pepsi and Coke announcing that Aquafina and Dasani, 2 top bottled water brands will now be sold in aluminum cans and bottles. So despite the recent downturn in profitability, we are actually embarking on a sizable investment in Belvac between 2019 2020. UB is progressing well in consolidation of its 4 facilities to 2 and expects to be complete by the year end, realizing the reduction of fixed costs and labor efficiency. From here, we can concentrate on the benefits of line balancing, SKU reductions, etcetera, and we expect to realize this potential progressively through 2020, particularly at Randell. I'll address the DFR automation in an upcoming slide, but let's address some of the changes in the market in retail refrigeration and how we responding them from a product perspective.
Small format retail has been a growth area for the business and we've responded to the unique needs of that segment by introducing new product formats such as grab and go case and distributed refrigeration systems that are more prevalent than centralized systems in small stores. As you can see from the performance of the KPIs of our solar chill solution, we are responding to the smaller distributed format trends in the industry and are tracking well on share realization. We have also been working on unique initiatives with a company called Cooler Screens that is based here in Chicago and uses Dover's proprietary door technology for their integrated digital display offering. This proprietary door is an enabler for Cooler Screen's digital solution that displays pricing, merchandising, advertising and other solutions which can deliver significant return on investment to retailers and brand owners. We are very encouraged with the early trials and encourage you to take a look at the beta sites installed at Walgreens and hopefully soon at other large retailers.
Let's transition to the go forward portion of the strategy. I hope it's abundantly clear now that we view Dover as a high value portfolio and see clear path to drive superior value creation through a strategy grounded in GDP plus growth, continued improvement in returns and smart productive reinvestment and capital deployment. We've covered the growth profile in prior sections extensively, so this section will expand on 2 other legs of our strategy, improved execution to drive returns and capital deployment. Yesterday, we announced our new segment structure and operating model to our company presence. This has been a work in progress over the last 16 months as we essentially removed the management layer and begun to reinvest those resources into our digital and operational capabilities.
We expect our operating companies to have a self funding mindset and the corporate center is no different. We will run a lean center. As you heard during the segment presentations, we have purposely bundled the businesses for commonality of business model or technology to make our decision making processes faster and more efficient, especially as it relates to operational efficiency improvements and measurement, digitization strategy and capital allocation. As noted on the bottom right side of the slide, our operating company management retains in charge of their customers, products and business strategy. They are also the cultivators of proprietary deals, which remains our preferred avenue of inorganic investment.
With the center drives is Dover initiatives that allows us to extract productivity savings across the portfolio. I'll address 3 of these areas in the following slides. Dover Business Systems is a centralized back office designed to handle high volume repetitive transactional work in finance, HR and IT. This asset has been in flight for several years, but as you can see from the chart below the penetration rate by process is still relatively low versus the opportunity. Has been hard work done over the past year in terms of infrastructure and systems deployment where we feel now we are ready to increase the penetration rate and drive productivity benefits across the portfolio as you can read on the right hand of the slide.
This is a unique multi year opportunity for Dover. I addressed the funding mechanism of our digital labs running last September and some of the individual digital business initiatives in the portfolio review section today. Our leadership has been making steady progress. We have stood up Dover Digital Labs in Boston and have moved quickly to begin piloting customer facing applications of common infrastructure with some compelling pilot results, as you can see on the right hand side of the slide. By leveraging a central resource for IoT and connected product initiatives, we are able to reduce redundancy of support infrastructure and manage proliferation of common parts such as sensors to keep our total projects cost competitive.
Finally, by centralizing IT infrastructure management, we can begin to extract scale benefits from common systems from telephony, hosting services, software licenses, etcetera. We expect to derive material savings in this area in 2020 and believe this is a multi year opportunity to drive efficiency. If we use what we have done in digital as a playbook of what we have embarked upon within central operations functions, which has been traditionally a challenge to Dover due to complexity of portfolio and the disparity of the IT systems. 1 of the largest benefits of this resegmentation is our ability to adopt common managerial frameworks for operational improvement across the portfolio. As you know, we have already begun this especially in automation and footprint projects, but we are now going to systemize this approach across the common platforms.
It's not as if we're starting from ground 0 here as many of our operating companies have robust continuous improvement programs embedded in their day to day operations as you can see in some of the results in the margin improvement trajectory presented earlier and the solid conversion margins. Our intention is to get common systems and measurement tools in place so we can train our managers' employees and build our operational talent pool. So that brings us to Slide 36, which is a bit of a semi recap. So I went over our initial focus. We completed the SG and A cost reduction across the businesses with $100,000,000 net cost takeout, which resulted in $0.53 of EPS accretion.
2020 in flight, we are initiating a set of actions resulting in another $50,000,000 in net cost takeout through footprint rationalization, IT centralization, center led digital and operational optimization. It's a bit of a misnomer, but we consider all four of those to be multi year avenues for synergy extraction. DFR and DFS margin improvement execution we've covered and we expect to execute on a deal pipeline that I'll cover in a moment. In the future, we expect to sustain 25% to 30% plus core incremental margins, consistent execution with strong incrementals, smart inorganic cash deployment that will result in portfolio mix improvement, reinvestment for compounding returns and rigorous synergy capture. Moving on to Slide 2037.
This is an update from the slide that we used last September. Strong cash flow across various economic conditions is Dover's strongest asset. We have rerun a similar exercise of future firepower at target leverage as we did last year and are reiterating our cash flow guidance as a percent of revenue. Don't get nervous about the 8%. We're clearly targeting the top.
It's clear that we have ample cash flow and balance sheet strength to fund our inorganic and our organic and inorganic aspirations while maintaining a prudent balance sheet policy. Our capital allocation priorities remain intact. The dividend in absolute terms is solid and will continue to grow. Our priority is to invest organically, sustaining our productive assets, investing in productivity projects and organic growth initiatives and capacity, innovation and R and D. These projects are in our control to manage in a proven track record of the highest value creation.
We will be opportunistic inorganically and will remain disciplined with our value creation criteria, business profile criteria and as described in the right hand of this slide. We will be transparent with the industrial rationale and the performance over time. We have a diverse portfolio and multiple platforms from which to build scale as you've seen earlier in the presentation. We will stick to markets we understand and businesses that we have institutional knowledge of how to operate. We have ample authorization for share repurchases for excess cash that cannot be deployed within our return criteria.
Moving on, here's a quick update on some of the material organic investments. I hope that the first two are self explanatory given the color we provided on the high value businesses in our Pumps and Process Solutions portfolio. Both are on track to deliver significant long term value to their respective segment. Our DEFR automation project continues with beta units coming offline by the end of the year. We expect full production to progressively come on stream through the first half of twenty twenty.
As part of the project, we are also fundamentally changing the business model in terms of SKU simplification with the intent to significantly reduce base models and operational complexity. We are making good progress as you can see from the stats. We need to change the cost structure and that's important, but we also have a real opportunity to materially improve the quality and the time to serve and that's what our customers really care about, a high quality product that's easy to maintain that can be delivered on time to meet complex build and maintenance installation schedules. As I mentioned earlier in the presentation, we have line of sight in reaching our margin goals exiting 2020 in a stable demand environment. I covered our overarching M and A criteria and valuation philosophy earlier.
This slide breaks down priorities and intent by segment and the market structure in which they operate. As I mentioned during the recent earnings call, I do expect the portfolio to be different in 5 to 10 years, mostly through high value additions that enhance the portfolio along the vectors described on the right hand side of this slide. At a high level, we remain within our circle of competence with a bias towards reinvesting in high value fluid related and imaging and ID businesses and will add disproportionately to growing and stable components, aftermarket and software side of the business across the wide portfolio. And wrapping up, this strategy lays a foundation for continued outperformance, revenue growth targeting GDP plus revenue stability at 30% reoccurring and highly repeatable with the intent to expand short term margin expansion in the $50,000,000 net cost takeout and 25% to 30% incrementals, EPS growth targeting double digits, free cash flow at the center of the range at 10% of revenue and total shareholder return and top quartile. In the final slide, after 41 or 42 minutes, just reiterating where we are in terms of strengthening our execution and delivering other commitments.
So if we go back, I'll add Lib a little bit here. If we go back to September, when I asked of everybody was to give us a chance to go execute and we thought that were things that we could do operationally to gain some credibility in terms of our ability to deliver. I believe that we've done that over the last 12 months. I believe that we've done a fundamental look at the portfolio. Clearly, we have opportunities to increase margins and grind out margins higher.
That's clear just by comparing them to some of our biggest competitors, quite frankly. I think that we've got the pillars to drive that expansion over time. And I think that our businesses in terms of winning in the marketplace, in terms of their customer relations and products, you can see that we've done our managed operating management has done a fantastic job in terms of their overall positioning. So it's just a matter of us winning in the marketplace if we're picking the right markets and then driving a layer of execution behind it over a multiyear period. So that finalizes the presentation.
We'll now open do you have any statements you need to make before we go open to Q and A?
I don't have to make them.
But we'll open to
Q and A. We'll pass the mic around. All right. We'll start left, front maybe and then kind of alternate.
Thanks. At this point, we're going to open the floor up to questions. We do ask though that you do identify yourself because we do have folks of course on the webcast. So if you could just identify yourself before you ask the question that would be very helpful. So if we have a question right here we'll start.
Thanks, Julian Mitchell. Maybe just the first question around the how the cost of goods sold or footprint optimization plan is trending. I think you talked about $14,000,000 of savings next year. I guess that's within that $50,000,000 total. So how do you feel about where that $14,000,000 number can go in the long run?
Yes. I mean, we get trying to monetize the footprint aspect of it. Look, there's significant runway, but it is a multiyear journey, right? And we're in the midst right now of fundamentally trying to change the retail refrigeration business, which is a big project for Dover, but at the same time, standing up a greenfield plant and our highest growth, highest margin business within our pump solution group. We've got significant runway, and I think that the potential is high in our components business, where we have a lot of small plants.
But these are highly engineered solutions, so we got to be really careful about the time line of doing it. But my expectation, if we're targeting something like $50,000,000 a year, dollars 20,000,000 of that on a compounding basis over year can come from footprint. Think that's a realistic objective.
Is there a follow-up, Julian, on that?
Sure. Don't give them extra.
Go ahead. And one quick one. I mean, when you're thinking about the portfolio in aggregate, you've got 2 of the 5 new segments earning a mid-20s EBITDA margin already. Is that where you'd like overall each of Dover's businesses to be eventually when you're thinking about a portfolio 5 years out?
Yes. Optimally, yes. But clearly, we've got portions of the portfolio that need have some catch up potential. And while we have certain parts of our portfolio that are best in class in terms of the March performance, I think that hopefully, it was somewhat eye opening by delinking the fueling solutions group from the pumps business, for example, if you take a look at the margin there. Yes, I mean, that's an aspirational mid-20s EBITDA, sure, if we get it right over time.
And how we get there, I think we have a variety of different avenues, but we'll pursue kind of an overarching organic strategy and build our way there. And if we can help that out by portfolio pruning in or out, we'll consider that also.
We'll try to get both sides
of the room. Rebecca, if you'd like to go to
your side of the room, please.
Thanks. Steve Tusa from JPMorgan. First of all, just to clarify the $50,000,000 we're taking the base for 'nineteen and then adding $50,000,000 worth of EPS to 2020? Yes. There's no like offsets or anything like that?
No. Okay. And then second of all, you guys have a nice perch on economy like how do bookings look so far throughout the course of the quarter, seeing anything in September that's interesting, there's mixed messages from the macro, obviously. Just curious as to what you guys are seeing in your more economically sensitive businesses?
Yes. I mean, nothing unique, but clearly, China is the longer this drags out, is beginning to become an issue. Other than that, our bookings are right where we thought they would be at the end of Q2. So we've been progressing well in that regard. Other than China, the only thing of kind of macro concern is euro dollar.
And if that continues under the trajectory that's going now, I mean, we'll live with it at the end of the day and it doesn't change our competitive position, but clearly, we do have a significant pool of euro revenue.
And then lastly, just on capital deployment, your stock is not expensive at face value. You mentioned some of the parts opportunity potentially. If the acquisitions don't come through and the stock doesn't rerate given what you guys have talked about today, will you kind of plow excess cash and is there a commitment to plow excess cash into buyback so that your balance sheet doesn't get too under optimized, if you will?
Yes. I mean, I don't know if we wrote it in the slide since there's been so many slides, but I think that we had made the concept we won't sit on cash. It's a negative carry. So if we're unable to execute, we've got the authorization to return value to shareholders.
Another question, we'll go to this side here.
Joe Ritchie, Goldman Sachs. So Rich, on Slide 14, where you laid out all of the different pieces of your portfolio and how they stack from a ROIC perspective. I mean, like you mentioned earlier, no burning platforms, but
you do have a few
there relatively close to your cost of capital. And so what are the plans to either grow those over the next 12 months or potentially think about divestiture opportunities?
Yes. I mean, it's I don't want to go into we had the option of naming them by OpCo, but we issue, at at the end of the day. But clearly, if we can't find an avenue where we can grow them at GDP plus over time, then we're going to have to action that part of the portfolio.
Okay. And then maybe kind of going back to the $50,000,000 number for next year. So you mentioned on the margin a couple of things, a little bit worse since the quarter. If things were to get even worse than that and we do have, call it an industrial recession, what other actions do you potentially have at your fingertips to potentially offset some of weaker growth environment?
Look, I mean, these are relatively flexible businesses because of their scale. They don't so if we whether it's by business or it's a complete macro, we've got the ability to action our cost base relatively quickly. I mean, look, I think take a look what we did on the SG and A initiative. We clearly we did that in a time where we're growing the top line. So we've got that room plus in a market downturn.
Rebecca, go ahead.
Rebecca, go ahead. Thanks.
Thanks. Jeff Sprague from Vertical Research. Just back to the 50.
Everybody loves the 50, okay.
I love it in 2 ways. First, I just want to confirm you're saying it's 50 and then we're thinking about incremental margins on top of the 50? You are? And then actually, to the earlier question, you actually said $50,000,000 a year. And so I would imagine at some point kind of the restructuring and the incrementals start to blend together.
But maybe give us a little bit of kind of further vision on the next waves of restructuring, maybe it's some of this business service stuff that's underpenetrated, just kind of the magnitude of the outlook?
Well, look, I mean, there's we're going to get me parsing the 50, I knew it. If we say that the roll forward portion of the $50,000,000 is 20 percent or $20,000,000 of that is footprint, just as a proxy. The footprint you're going to see, right, because we're going to take a The footprint you're going to see, right, because we're going to take a charge and then we're going to basically say this is what the payback of the charge is because it's going to be a material event. The balance of that $50,000,000 is not foot The balance of that $50,000,000 is not footprint on the come, so to speak, right? I mean, I thought I was being pretty explicit in terms of what the opportunity was in terms of some of the digital programs and a reduction of our SG and A or our customer facing portion of the business and what we think that we can extract out of IT over time.
So which you're not going to see. It's just we're going to take it out and it's going to roll for the portfolio. I mean, I think that the SG and A, we committed that we're going to come back every quarter because that was part of this notion of we need to gain some credibility to do what we said and we came back and we've done it every quarter of showing you in EPS terms. I'm not going to come back every quarter. I mean, we'll you're going to see it in the margins over time in the $50,000,000 I think if you go back and look at the transcript of kind of the 3 pillars of value creation, which is in operational value creation.
I think I referred to all 3 of them into being multiyear efforts. And we think that the quantum that we see in 2020, we can get on a sustaining basis over time. So when you'll see it is if we do something
on the footprint, clearly. I guess I would add to that, that in 2019, as the year is playing out, if you think about the SG and A takeout, total conversion on volume has been over 50% across the portfolio. If I take out that amount and you think about this $25,000,000 to $30,000,000 that we're saying incremental margins going forward, we are within that range in 2019. So you take the $50,000,000 next year plus our confidence that we continue in good GDP growth environment at a 25% to 30% incremental, that's the way you should be thinking about. Now the question is what's the top line?
Next question.
So back to the 50. Yes, Nigel Kopenhalt. I do actually have a question. I mean, so the 50, last year it was 134 gross and then 34 investment, 100 net. So is there a net NOF against our CFC?
Are we invested?
No, we gave it a net figure this time.
Right. Okay. So there is a gross, but you're not going
to give it to us.
And then just on the resegmentation, so bravo on the full disclosure. Are you going to be giving us margins and CapEx? Are these full segment disclosures
you're going
to be giving us?
You'll get margins at the end of Q4.
Yes.
Okay. CapEx by segment, I haven't really thought about it yet.
Well, we get that in the 10 ks normally.
Yes. I mean, in our quarterly, I don't know if we'll get there. We'll just give you growth CapEx probably.
Well, what we intend to do is in the 4th quarter,
we'll give you the history up through 3 quarters.
And then when we report 4th quarter, history up through 3 quarters. And then when we report Q4 in January, we'll be showing the new segments going forward at that point. So we will endeavor to get that out here in the tail end of Q4.
And then my final question is, if you're running at 20% EBITDA margins, presumably going to low 20s, maybe even mid-20s aspirationally, why wouldn't free cash margins, obviously, depending on leverage, but why wouldn't free cash margins be mid teens or better?
Yes. That's where we get caught between this doing this presentation and having intra year guidance
out there.
So we didn't change the percentage of revenue just because we didn't get a good crossways between what we're saying publicly about 2019 guidance and this presentation. So I think that your point is well taken. And as margins expand, we would expect that metric to expand a little bit. Next question, Rebecca.
Thanks. Can you identify yourself please? Sure. It's Scott Davis. Going to 5 segments, Rich, is that somewhat meant to constrain the M and A effort around those 5 segments?
Are you willing to go to segments
or 7 or is there some
upper limit to what you think
is reasonable? I think the 5 is appropriate. I mean, I think when you dig into the segments, we were trying to get operational or market commonality. Meaning, when we talk about operating systems across a diverse portfolio, you have to tailor them to the nature of the business at the end of the day. How are you going to measure performance in printing and ID is going to be different than one of the more industrial businesses, clearly, because the drivers are completely different.
So I don't expect to carve this portfolio into more segments nor do I expect to create new segments through M and A. I think that we've got a wide enough breadth of avenue and opportunity that these five we would hope that would all grow organically and inorganically over time.
Is there an expiration date on the fixer up job with refrigeration? If you can't get to where you want you need to get, will you should we be patient out to the end of 2020? Is it into 2021?
Yes, I'm trying to remain patient myself. But yes, I think that we've made a commitment and we've made an investment. We want to deliver on those margins. If we can get it to 15%, return on invested capital improves in that business significantly because it doesn't consume a lot. But clearly, and when we comp it against the balance of the portfolio, to the extent that we can monetize that over time, we'll see.
But up until that point, I hope we're never put into a position where we have to capitulate, I guess is my answer.
Thank you. We had a question up here.
Andrew Obin. Just a question on the dividend payout ratio. Could you benchmark against because I would have expected higher rate of growth?
You want a high rate of growth in the dividend payout ratio?
Not dividend. You're sort of saying that you're going to grow dividend low single digits, right? So as you think about your dividend payout ratio, who did the Board and who did you guys benchmark your deals against? That's the question.
I don't think that we benchmarked it, quite frankly, because it's a signaling effect on the dividend. I think that committed to grow it over time. As we grow it over time, if we have to update the payout ratio in terms of percentage, we'll do so. But I think the commitment is that throughout this next cycle, that the absolute value of that dividend will go up.
And just one of the business questions on EMV. What percent of the base has is upgraded
now? I don't know. Can we deal with that at the end of Q3?
We absolutely can. And then the other question on free cash flow, you did say, and maybe I didn't hear it, you did say upper end of 8 to 12? Yes. I know we had that big
panic last year. I know about the 8 number and I think that our target, like any of the targets we give out, is at the upper
end, right?
We did mid target last year, right, which was a funny number because of all the restructuring cash charges we had. We're not on path to have that now and we're clearly targeting the higher end of it.
Thank you.
Right here,
go ahead.
Thank you, Andy Kaplowitz. Rich, so I'm curious about your comments on Belvac, because it's been kind of slow as you know for a while. But maybe talk about visibility into that business. I mean it is a high margin business. You mentioned this sort of change in some of the key customers.
So did they kind of just tell you and then you have good visibility for the next year, so you do this? Like how much of a bet are you making on that business?
For Belvac, we're making a big bet. But in terms of the consolidated group, we are not, just to be clear. I think it's the only reason I mentioned is because we believe that Belvac is going to turn because the macros behind that business and the shift from PET to aluminum look very good. And if you look at the can makers, they're running at practical capacity right now. So something's got to give.
I mean, there's Wall Street Journal articles about users complaining about the pricing of aluminum cans, right? So that's always a good checkpoint for us. So we're going to make an investment in it because we think we can grow it, we can grow behind it. So that's the only reason I mentioned it. It's because quite frankly, it's been down and we've been in the unfortunate position more because of the margin performance of refrigeration that we're running around explaining Belvac.
Quite frankly, if we can get refrigeration to our margin target, Belvac doesn't wag the dog, so to speak. But having said that, we think that there's some interesting value creation opportunity in that business.
So can I ask you about the $30,000,000 actually that you spent in the $130,000,000 in the sense that a lot of the presentation today was about digital and connected truck, all that kind of stuff? So what have you seen since you invested that money in terms of the acceleration in growth? I mean, you've talked about software at ESG in terms of the growth. How much could that contribute as you go over the next couple of years into that sort of guidance of GDP plus?
I don't want to monetize it because I'd be swagging at it. I'm not going to do that. I think what I have seen that is critically important is that if you put a guiding structure at the center, you don't have a lot of small operating companies that all have aspirations to kind of digitize their business in a certain way because they recognize the adjacency opportunity and kind of the stickiness of those kinds of streams. But by having a kind of a governance center and by building them off common platforms, we see the speed of adoption and the cost of that adoption, the payback has been significant. Next, Rebecca.
Thanks. Mick Dobre, just to follow-up on that point. It struck me through your slides you repeatedly referenced recurring revenue and you also talked a lot about digital. When you're framing your incremental margins though 25% to 30%, these are pretty normal manufacturing incremental margins. How do you think about your change in your Actually, I think
that's high, but that's okay, Mig. But anyway, yes.
Well, okay. My point is,
should we see a change in your incremental margins as you're building up more of
this recurring revenue and software type business.
Part of grinding these margins up over time, we hope to be getting operational efficiency that more than offsets inflationary input costs, right? And then doing a good job in capital allocation in terms of product mix, which to your point, if done correctly and successfully, gross margins in software tend to be very high. So as those businesses scale, we'd be the beneficiary of that. Now having said that, I think that we also need to be clear, how can I say this, that we look at software as an add on to our established positions in products and not as a strategy by itself? So I don't I would not expect for us to run headlong into standalone software space, right?
I think that anything that we do in software will be intrinsically linked to the core business that is pursuing that adjacency.
Okay. And then lastly, a clarification on the $50,000,000 again.
I'm not going to give them out
Go ahead. SG and A versus cost of goods sold, if
that's I don't know. 5050. 5050? Yes. The scales are just the same.
5050 on the 50, maybe you can certainly use that as a headline. Okay, yes.
Next question?
I mean, the 50 out of our entire COGS is not like a Herculean effort. I mean, I think there's I think that at the end of the day, I think it's important for us to kind of give a number out there outside of the hope of revenue growth, right? But let's before we start parsing this number and if I compare that to our total cost of the corporation, it's something. But at the end of the day, as compared to inflation on labor and the hard work that we need to do just to offset that to retain the 25 to 35 margin performance, it's small potatoes, quite honestly. It's more of a message send, both internally and externally, that we've got a mindset here that we can grind out margin performance without having to rely on net revenue because a lot of times the market is going to dictate
the revenue growth. Thanks. Walt Liptak. Going back to the segments, I wanted to ask about the changes that you just announced. Was there a cost savings related to that?
How disruptive was that to kind of leadership and management of the businesses?
So far so good in terms of disruption. So I made in the earlier comments, we had made the presentation last September. There was a lot not a lot, there was some pushback of, okay, I get it on the cost takeout, but the revenue, let's be careful about the revenue going forward because the corporation is going to turn inward. And we said, you know what, we're not touching the customer facing portion of SG and A. And we believe that we can protect the top line based on market conditions while taking the cost out at the end of the day.
And I think that that's a similar situation that we're in right now that we are investing and we'll continue to invest in building up our digital resources. We're going to be standing up a bigger group in terms of our operations group. It's not going to be massive, but it's going to be a cost. So I look at it this way. What we've done in terms of the reduction of a managerial layer is just being redeployed for central resources.
So net net, it's not a savings. And it's more or less what we tell our operating companies to do, right? You've got changes in strategy, fair enough, but you've got to self finance those changes in strategy and that goes for the center also.
Okay. Are there going to be any changes to incentive comp as a result of the new segments, the new managerial structure? Not materially. Okay. And that's 25% to 30% operating leverage.
Is that across the board or
some of
that? That's in consolidation.
That's in consolidation. So the different segments will have different targets that we're going for. Okay.
We have a question at the front of the
room here. I'll come up.
This is Ivana from Gordon Haskett. You talked about digitalizing distribution. Is that completely rolled out now and we're waiting to see the benefits?
I think if I call your attention back to the slide, it will tell you where the Opcos where we've just begun to stand it up. So it's relatively nascent. It's got a significant runway, but we need to beta test these. And then once we build the scale and the infrastructure in the back, then we progressively roll through with the priority on the distribution side of the business.
And are there any of the businesses that disproportionately benefit that have higher percent of distribution?
The answer is yes, but I don't really want to go opco by opco. But I think if you go back and go through the materials and you go back in terms of that 43 minutes of narrative there that I tried to signal the business model, whether it's direct or distribution as we went through the individual segments. The group that way
specifically. And then the benefits, would they be included in the $50,000,000 or would they be an incremental margin?
That's what you're doing, dollars 1,000,000 by down to the $1,000,000 Yes, yes.
So I'll look But they seem like an increment like it seems like it would be more It's
not going to be overly material in terms of the benefits. I'd put that in kind of the grinding out of margin performance over time rather than kind of specific things. And it's got a growth element to it. Over
there? It's Jeff Sprague again. Just a couple. Since you did this kind of unpacking of the business and going back and looking historically, just wonder that component sleeve that you didn't call aftermarket, but suggested it's sort of aftermarket like with replacement. How that sort of stuff actually behaves in a downturn?
Is that really short cycle, comes down quickly?
I think it's purely a question of the reoccurring portion of the components business is larger than the built up systems business. That's all, right? So if you think about compressor valves and things like that, I mean, we supply into new builds, but a lot of what we do is refurbishment, replacement and maintenance, right? And that's why we separated them.
And thanks for all the granularity. Just on your Dispenser business, you'd give us a rough cut geographic mix of the Dispenser business?
How about in Q3?
Q3? 90. Perfect.
One more question right over here. Hi, Mustafa Alco from Bloomberg Intelligence. Just revisiting your segment re segmentation engineered products, you grouped together the STACKER, TWG, MPG, OKR together. They're quite different businesses. I was wondering what kind of plan you have there for like optimizing costs and the rationale behind putting them in 1 opco?
Well, they're they well, we split engineering I'm not going to get the name there, they're all changing engineering systems in 2. What we did was put those smaller businesses under 1 common management, all right, because they're unique businesses to themselves. And how we run them is going to be different than we run PWG, VSG and ESG, which tend to be bigger industrial businesses with if I took you around to the plants, they look very similar, right? They're building up big built up units as opposed to MPG, which is a military contractor that makes specialized products. You can't so it's more of a managerial grouping than anything else.
Next question up here.
It's Andy Kettles again. Rich, just two follow ups on CFS. You said that we can all see the public competitors in terms of what their margins are. So assuming that you hit the sort of 16%, 17% margins by the end of the year, what still needs to be done to get the margin to equal sort of what the competitors is? Is there a different business mix at
all? I would have hoped that you said now that I see OPW and DFS together, look how big the margin is. And anything that we get on the dispenser side is gravy versus the comps that are out there. But I'll answer your exact question. Look, I think I was pretty forthright.
They've made a really good improvement, right? So I mean, the management really put their nose down and proved that through operational grinding it out, look what we see in terms of 300 basis points in a 12 month period. We think the LPW is best in class in terms of margin. So we'll commit to incrementalism on the OPW side, but it's not like there's a margin gap And arguably, OPW is the margin leader versus its competitors. We still need to work on EMEA on the dispenser side, for sure.
I mean, I think that we and management believe that there's some room to run there. And that's why I said, we believe we're going to exit at our target margin, but we're not done yet, at least on that half of the business.
And then just one follow-up on the pumps business. You mentioned that people maybe the market doesn't understand it fully and you talked about 40% recurring. But when I look at the end market exposure rate, a lot of it is chemicals, oil and gas. So how do you I mean, maybe it's a follow-up to Jeff's question is how do I think about the cyclicality of that business or how do you it's had 7% orders growth, which is good, but should we worry about that business?
I think that would arguably the one that you should leave more at least about. But these are not large pipeline pumps, right? They're going to flex up and down based on new builds and everything else. These are smaller pumps at the end of the day with a different technology that are in chemical plants and in refineries. And so whether you're a believer that there's going to be a capacity reduction utilization across that complex, which based on input costs, one would argue that the United States, where most of this business is, is the from an input cost point of view, is the low cost producer now in base in all of those base chemicals and fertilizer and the balance of it.
So to the extent that we and 50% of the revenue stream of the bigger or the pure play pump business is replacement, It's not a bad place to be when it's covering those margins. So look, it's not riskless by any stretch imagination, but I'm not I think I would have thought that when we showed the exposure to end market, you get a lot more comfort because generally people look at pumps and fall out of the chair screaming oil and gas.
Anyone not have a chance to ask a question yet?
Go ahead, Rebecca.
Thanks, Rich, Larry De Maria. Curious, obviously, a number of the brands and companies are large global, they are top players. There's a few niche businesses too, such as Unified Brands. Is that a sustainable position for companies like that now that you've gone through the operating model etcetera or does that have to get bigger through M and A?
I don't think it needs to get bigger to improve its performance And we're in mid flight and doing a lot of work of reducing the fixed costs. So I think I put that I put UB in with some of the other businesses that we're in the midst of operationally turning around. We'll be done with the physical footprint by the end of this year, and then we're going to need another year to kind of do the SKU reduction, particularly in Randell. So our brand new facility in Mississippi will be up. It's running now, but it will be completely up and running by the end of the year.
And then we're going to go back to Michigan and really work hard on the Randell business where, quite frankly, the margins are need to be improved.
And if I just a follow-up, thank you for that. You're targeting 30% plus recurring revenue and you're already there. Maybe I missed this earlier, but is there an actual higher number we should be looking at close to 40%? And can you get there or
I'd like to see how it develops over time because then I'm predicting revenue across the portfolio over a time series. So I think that there's a recognition that we would like it to be larger, but I don't think it's a operational imperative to kind of all by all means get there, right. I think that it's kind of like a sustained multi year effort at the end of the day.
Final question, did you have one front and center right here?
Just a question in terms of the new segment breakdown. Have the leadership decisions been made and have the announcements been I didn't see any announcements. When should we expect them? Are these going to be internal candidates Are you looking also externally?
The last announcement was a retirement that you should have saw last week. So that was the last of the seg presidents. So and yesterday, we had all of the OpCo presidents over in Downers Grove and took them through the new organization and the operating model and everything else. So it's nothing external. It's all but it's all done internally.
And I think that needs to be done is the central operations resources need to be built up over the year, but that's not going to be something overly significant. It will end up being the size of like digital to a certain extent.
Thank you for all the questions. Rich, if you have any final comments? No.
Thanks for coming to Chicago. You made our life easier, considering we had all our Presidents here. And as usual, if you've got follow on questions, see that man at the end of the day.
Andre, I'll leave it to
you to close the meeting now, please.
Yes. That concludes our meeting. Thank you all, and we look forward to speaking with you in October.