Hello, welcome to today's Ashtead Group plc results for the first quarter. Throughout this, all participants will be in listen-only mode. Afterwards, there'll be a question and answer option. Just to remind you, this call is being recorded. Today I'm very pleased to present Geoff Drabble, Chief Executive, and Suzanne Wood, Finance Director. Please begin.
Thank you. Good morning, welcome to our normal shorter Q1 call. To me, this call has always signaled the end of summer, so I hope everyone is suitably refreshed after what's been a very interesting, if not historic, time. Since our year-end results, we've had Brexit, a new Prime Minister, a rubbish European Championship, and a great Olympics. Yet through it all, Ashtead remains remarkably consistent, as you can see from the overview on page two. It's been a good quarter reflecting the strength of both our model and our end markets. Not only have we seen further revenue growth and market share gains, but importantly, it's been very profitable growth with group EBITDA margins at a record 48% and operating margins a very healthy 29%. We spent time at the year-end detailing our capital allocation priorities as we entered a different fleet replacement cycle.
The execution of this policy has been clearly demonstrated in our actions throughout the quarter. We've invested GBP 328 million in capital expenditure and a further GBP 64 million on bolt-ons. We've also spent GBP 17 million on share buybacks, all of this was achieved whilst maintaining leverage at 1.7x EBITDA, well within our target range. Our strong margins and associated cash generation give us a wide range of options for continued EPS growth. Looking at current trading, both divisions continue to perform well with a solid market outlook. Of course, we do benefit from weaker sterling given the size of our U.S. business. As a consequence, we expect full year results to be ahead of our expectations, the board continues to look forward to the medium term with confidence. With that, I'll hand over to Suzanne to take us through the financials.
Thanks, Geoff, good morning. The group's first quarter financial results are shown on slide four, we were pleased to report an underlying pre-tax profit of GBP 184 million as compared to GBP 161 million for the same period last year. Weaker sterling improved profitability by approximately GBP 17 million. However, this was broadly offset by the GBP 12 million impact of lower gains from used equipment sales, reflecting reduced replacement capital expenditure. We'll look at the used equipment sales and related gains in more detail in a moment. Rental revenue at the group level increased by 12% on a constant currency basis in the first quarter, margins continued to improve, clearly indicating the profitability of our business model. EBITDA margin for the quarter was 48% and operating profit margin was 29%. On slide five, we've provided some additional information on used equipment sales and related gains.
As expected, fleet disposals were lower in the first quarter compared to last year for two reasons. First, this year's planned reduction in replacement CapEx has reduced both revenue and gains from the sale of used equipment. Second, in the first quarter of last year, we had particularly high disposals as we adjusted the size of our oil and gas fleet. Both of these factors caused anomalies in our year-over-year growth percentages. Excluding the sale of used equipment from both periods, revenue and underlying profit increased by 12% as compared to last year. A few of you may have spotted what appears to be an unusually low margin on sales this year. Let me address that point before we leave this slide. Each quarter, we record a fixed provision for estimated costs of shrinkage, meaning lost, stolen, or scrapped assets.
For a quarter with an unusually low level of asset sales, these fixed costs have a disproportionate effect on margin because there's no revenue associated with them. The actual margin realized on equipment sales this quarter was right in line with our experience in fiscal 2016. The ratio of sales proceeds to the cost of equipment sold also was in line with last year. On slide six, we show Sunbelt's first quarter results. Rental and related revenue grew by 11% as Sunbelt continued to benefit from strong construction activities and structural trends in its end markets. The operational efficiencies that we discussed in June were evidenced in the quarter by Sunbelt's overall drop-through rate of 65%, which in turn pushed margins higher. EBITDA margin was a record 50% and operating profit margin increased to 32%.
At the bottom of the chart, we've shown the gains effect that I mentioned earlier. Operating profit increased by 4% as compared to last year, but excluding the gains on fleet disposal, the underlying year-over-year growth rate was actually 10%. Turning over to A-Plant on slide seven, we've shown the comparative figures. The U.K. business continued to perform well with rental revenue growth of 14%. EBITDA margin was 38%, and operating profit margin was 18%, reflecting good cost discipline in the quarter. Reduced replacement CapEx and lower gains also affected A-Plant's comparative operating profit. Excluding gains, underlying operating profit for the U.K. division increased by 23% year-on-year. On slide eight, we provided some detail on our debt and leverage profile. Our net debt increased in the first quarter as we continued to invest in the fleet and made a number of small bolt-on acquisitions.
Weaker sterling also increased the level of our reported debts. However, our leverage ratio continued to decline, ending the quarter at 1.7 times, a level which was in the middle of our target range of one and a half to two times EBITDA. This range provides us with a high degree of flexibility and security through the cycle, as discussed in June, allows a significant amount of capital to be available for discretionary spending, such as on M&A and returns to shareholders. That concludes my comments, I'll hand it back over to Geoff.
Thanks, Suzanne. Turning to page 10. Let's now look at Sunbelt with the enhanced analysis we introduced at the year-end. Our general tool business was particularly strong in the quarter, which was to be expected given the strength of both construction and our broader markets. Employment levels in the U.S. are high, as is disposable income, and we are seeing the benefit of this across a range of sectors, from vacational activity to remodeling to the broader entertainment space. We saw good volume growth, +18%. Yield was down a little due largely to mix, but as we will show in a moment, these trends are collectively very positive for margin. Specialty, which is 20% of our business, has seen 3% overall growth. We've included oil and gas in our total specialty business because this is where it should sit.
It's of a size now where it does not warrant being called out separately, but of course, in the short term, it does still affect certain metrics. As always, we'll try to get the balance right in terms of our disclosures. Within the overall 3% growth, specialty excluding oil and gas grew 11%, and oil and gas fell 46%. As always, it's important to remember that specialty demand remains event-driven on a quarter-to-quarter basis, but over the long term provides consistent returns and remains an area which we aim to develop further. Outside oil and gas, a very positive performance once again. As I said in the introduction, the most encouraging element of our results over recent quarters has been our margin improvement, and this has been the case again in quarter one.
As you can see on page 11, same stores as those that existed since 1st of May, 2015, which represent 93% of our business, delivered a very impressive 71% drop-through. This, together with strong physical utilization, clearly reflects that we are not only growing responsibly, but also very profitably. Whilst there's a small negative yield due to mix, efficiency improvements and a different transactional cost profile means it's not a factor in our profit performance. This is very much a continuation of the efficiency themes that we discussed at the year-end presentation. Just to give it some perspective, for these same stores, 11% year-on-year volume growth was delivered with only 2% more heads. It's this level of continuous improvement which supports our strategy of organic growth and explains why overall margins continue to improve.
As always, due to the small numbers involved and the changing population, some of the greenfield and bolt-on data looks a little off. However, whilst not as good a same-store drop-through, it is still a very solid overall performance. The development of our greenfields and bolt-ons over time remains an important long-term margin improvement opportunity. In oil and gas, 40% of the revenue decline dropped to EBITDA this year, which compares to 193% last year. Therefore, I guess you could say it is slowly stabilizing, but the key is that it just continues to become less relevant as we move through the year. Moving on to CapEx on page 12, we are in total more or less where we expected to be.
We are towards the upper end of our growth CapEx range, given our strong fleet on rent and high utilization, and at the lower end of our replacement range for the same reason. The guys are sensibly holding onto their assets as they're out on rent on longer-term rentals. Therefore, our disposals have been very low and are likely to be until the winter. Also, as we've discussed, the population due for disposal is just very low. The fact that we are in such a different replacement cycle is apparent when you look at the total spend, which, as Suzanne highlighted earlier, does have implications for both gains on sale, but most importantly, cash. Given that we are broadly where we expected to be, we will update our full-year guidance at the half year when our early 2017-18 planning is starting to take shape.
This is the first year in our newly five-year plan, which is designed to get us to broadly 900 locations by 2021. That would be around another 300 stores or a 50% increase in our footprint. This imaginatively named Project 2021 will be the basis of our capital markets day in October, where we will share a lot more detail than we have historically as to the future opportunity from greenfields and bolt-ons and our experiences, particularly around clusters and relative margins. We have a well-tested and exciting plan, and we're looking forward to sharing much of it with you at a time when we don't also have to cover results. We've got off to a good start with 24 locations in the first quarter. You will see in the press release we made some further small bolt-ons in August.
Therefore, we remain well on track for at least 60 new locations this year. Moving on to A-Plant on page 14, and again, a good quarter where we continue to take significant market share. Volume was good at +17%, yield flat, and as you can see, utilization has continued to improve from the disappointing levels of a year ago. Importantly, as you can see on page 15, we continue to grow profitably. We continue to be selective in the work we do as profitability and returns, not just share gains, are particularly important in the U.K. market. It is good to see the growth in our specialty business, and you will note that this remains the focus for our bolt-on acquisitions, as highlighted by the deals we've announced recently, and you can see in this morning's press release.
Of course, the big question for the U.K. construction industry is Brexit, and the answer remains that it's too early to tell. Having said that, with a well-financed and diverse group and U.K.-centric competitors, we see more long-term upside than downside whatever the end market conditions as we continue to diversify and develop the business. To wrap it all up on page 16 before Q&A, let me just summarize a few key points. For the quarter, we've executed well in markets which continue to be supportive. It does remain a bit of a Goldilocks economy in both markets, with some bits hot, some cold, and others just about right. Looking forward, our view remains that we will see moderate long-term cyclical growth supplemented by further structural opportunity. Most importantly, we continue to grow both responsibly and profitably, adhering to our capital allocation priorities and posting record margins.
Our high margins and strong cash generation give us a wide range of options for continued EPS growth. Both divisions are performing well, with the benefit of weaker sterling, we expect full-year results to be ahead of our expectations. The board continues to look to the medium term with confidence. With that, I'll hand over to Hugh for Q&A.
Thank you. Ladies and gentlemen, if you wish to ask a question, could you please press zero and then one on your phone keypad now in order to enter the queue. Then after I announce you, just ask your question. If you find that question has been answered before it's your turn to speak, just press zero and then two to withdraw. There'll be a brief pause while questions are being registered. Our first question is over the line of Jane Sparrow at Barclays. Please go ahead.
Morning. A couple of questions, if I may. The first one, just given the impact of billing days on the first quarter, could you perhaps give us a bit of color on how August has trended? Then the second question, given your comment about customers holding on to equipment for longer, larger customers, less transactional work, et cetera, how does that change how you manage the replacement cycle more broadly for the fleet moving forward?
Yeah, sure. Morning, Jane. Yeah, the billing days was a bit of an anomaly this quarter. We had two fewer billing days in July and two more billing days in August. The Q1 results, as we announced them for both Sunbelt and A-Plant, the rental revenue growth would have been 2% higher had we evened it out. If you look at our presentation, our presentation from my slides is based on billing days. Just to give it some perspective, because you think, well, how big a difference could it make? If you look at Sunbelt in July, which was included in our Q1 results, we reported 9% rental revenue growth. It was 19% in August. Nothing changed materially between July and August. The secret is to divide the two, and you end up with 14.5% rental revenue growth, which is what we've done year to date.
We've been consistently ticking along all the way through the year at about 14%-15% rental revenue growth. It was the same in A-Plant. We reported 11% rental revenue growth in July and a whopping 27% in August. Nothing got better in August. It was predominantly billing days. Again, if you average it out, you get about 18%, which is what we've seen through the year. We've seen a very consistent performance in each and every quarter. A very good strong start into the second quarter. The whole billing days thing is just an anomaly. two days on 20 days is 10%. It's as straightforward as that.
Yeah.
Yeah, the point about the replacement expenditure is an interesting one. As you know, as we have developed the business, as we've added more larger accounts and bigger national accounts, a number of the dynamics in our business has changed. The transactional cost profile has changed, which is why even though we have a slightly negative yield, that's more than being compensated for by the lower transactional costs and our efficiency improvements. We're very happy to pass on some of those cost savings within a lower yield to certain customers, because from a bottom-line perspective, it all makes a lot of sense. There's also a dynamic in terms of when you look at, we have a relatively small population, but we have assets that come to the anniversary where they are due to be sold. If they're out on daily or weekly contracts, that's really easy.
They come back in, when they come back in, we sell them because it's the day to sell them. If they're out on rent for six months, 12 months, or 18 months, what do you do? Do you say, "Excuse me, can I have my asset back, please, because I want to sell it?" The customers are really happy with it. Our fleet is not that old, and we're generating good returns on that. We could bring it back. That would increase our gains on sale, but we'd then just be lowering our ROI because we're putting the brand-new assets back out just for exactly the same rental. We'd have all the transactional cost of bringing it back, selling it, and moving a new one out there.
It means that the replacement expenditure is likely to be back-ended, not front-ended, because we'll do a bit of a catch-up in the winter when naturally the utilization drops a bit. It is another one of these interesting dynamics in terms of how our transactional cost base is lowering as our business mix changes.
Okay, thank you.
We are now over to the line of Josh Puddle of Berenberg. Please go ahead.
Hi, good morning. My first question is on same-store growth. I wondered why you think you've seen a deterioration from the 11% in Q4 to 6% in Q1, then perhaps if you can give us a sense of how that same-store growth has trended through the quarter and into August. My second question is on your non-resi construction exposure. I just wondered, what are you seeing in those end markets? The data appears to have slowed since Q1. Also following on from that, I wondered if you could give us an indication of what your exposure to private expenditure versus public expenditure is within that. Thank you.
That's an awful lot of questions, Josh. Right. First and foremost thing, you've got to be careful that you pick up the right numbers. Let's turn to page 11. When we adjust for billing days and when we adjust for oil and gas, our same-store performance, as you can see there on slide 11, the fleet on rent is up 11%. Again, a very consistent and a very strong performance. The number you're quoting out of the press release incorporates same-store oil and gas, doesn't separate out oil and gas, and it doesn't adjust for the two billing days. I think that's just an anomaly between the numbers. As you can see, the same-store plus 11% remains very strong.
Presumably, the Q4 number, also the one I quoted, the 11% in Q4, that doesn't adjust for oil and gas. Presumably.
Well-
If you adjusted that for oil and gas, it would be materially higher.
Well, yeah, I'm going to look at my numbers now because I think I've got the Q4 presentation in front of me now. I guess Suzanne could pull out the slide. Is the pace of growth, given the tougher comparator, as a percentage, of course, is down a little bit. I think you've got to look at it that the market is growing at about 5%, and we continue to grow at around double the pace of growth. In Q4, same-store growth was 12%. It's gone from 12% to 11% with tougher comps. We think the activity levels remain very strong. I'm not quite sure if there's any material difference. That's not how it feels on the ground at all.
Okay. On the non-resi exposure?
As we've always said, that it's very hard to say precisely what our exposure is to any specific market. We have so many customers. They cover a multitude of sectors. It's no more or no less than it's been. It's probably slightly less as we broadened our specialty business and as we broadened our general tool more into restoration, remediation, entertainment, and stuff. Our experiences on the ground as witnessed by these results and going into August, remain very strong. I think, as we said, it's a bit of a Goldilocks economy. We have had strong monthly data and weak monthly data every alternative month for the last 18 months. Back in October, the manufacturing data was terrible, then it was great. April labor numbers were bad, May labor numbers were great.
Throughout the period, since people started to get a bit agitated about the U.S. economy, which was around 18 months ago when oil and gas went down. The U.S. economy, through various highlights and lowlights from the data perspective, has added three million jobs. If you look at over the last three months, I know the August labor numbers weren't great, but if you average June, July, and August numbers and average them out, that's 232,000 jobs per month have been created through the summer in North America. There are sectors that are high, there are sectors that are low. I know the consensus data now says that the public expenditure's down and private's up. I can point to a whole bunch of other data in Maximus in both which would point to the opposite. Our experiences are that the market's still strong.
There is an awful lot of construction activity out there, as witnessed by a very strong August and a very strong start to September.
Okay, thank you.
We're now over to Emily Roberts at Deutsche Bank. Go ahead.
Hi, it's Emily from Deutsche Bank. A couple from me, please. The first question is on your specialty growth, which I think you quoted was 11% ex oil and gas. Could you please give us some color on the split between volume growth and rate growth within that? Secondly, sorry to stay on the same point as before, but I noticed that the market growth on your slide 21 is now 4%. It was 6% in the last quarter. Could you give us a little bit more color on the particular end markets or verticals that might be driving that change in market growth, please? My final question, just looking at returns on investment and how that moves with fleet age. Given fleet age is probably now stabilizing, when should we expect the returns on investment to plateau? Thank you.
We seem to be going for multiple questions here. Let me start with the first one. In terms of the 11% specialty growth, it was pretty much all volume. Yield was probably +1. It was naught to +1. It's not dissimilar to construction. Yield is neither one way or another. You've got to be careful also, particularly with specialty, because it just depends which specialty business. If it's climate control, that's a very high yielding business, and that will change the mix. In the overall environment for specialty businesses, it is not that dissimilar to construction, which is it's broadly flat. In terms of market growth, yeah, look, the markets are growing steadily. We call to the 4%. Whether it's 4, 5 or 6, I'm not terribly sure anyone particularly knows. They keep changing.
I think the general consensus across all forecasters are that market growth has ticked down a little, outer years has ticked up, therefore the quantum of work, I believe, remains largely the same in all of our pipelines. I still think the biggest issue people have in terms of growth in the construction sector is the fact that there isn't labor available. I think there is an absolute constraint to growth. It's why, as I said in the summary slide, our expectation is around 4%, 5%, 6% growth for probably the next four or five years. That's our view, and it's a view fairly commonly held amongst our customer base when they look at their pipeline of work. A big issue in the U.S. right now, particularly in the construction space, is the backlog of work.
A huge number of projects are behind schedule and behind schedule because of access to skilled labor. Yeah, the growth forecast has ticked down a smidgen. I don't think it's got an awful lot to do with any fundamentals within the U.S. economy. I know there are different views on the U.S. economy, Emily. I know you think we're close to 1930s style recession. That's not our observation. The markets are solid, be it like 4%, like 5%. What we continue to see is good moderate growth for the long term. More importantly, as we've been saying for multiple periods now, two-thirds of our growth continues to be structural. We still see the biggest opportunity being to take market share both in existing stores. We're seeing market share opportunity from greenfields and bolt-ons.
We still see an environment where, despite very, very low cost of finance, our customers are choosing to rent rather than buy. Yeah, look, it may well be slightly slower than what we previously said, but I don't think we're seeing anything fundamental in any particular segment of our market. In terms of as we age the fleet, return on investment, you're right, should start to improve. Of course, we need to really split it between same stores and greenfields and bolt-ons. Obviously, when we open greenfields and bolt-ons, that's predominantly with brand new fleet. That has been a big drag on our ROI. Yes, as the fleet age flattens and maybe even ticks up a little bit, ROI will improve.
I think we said we went through that in some detail at the year-end, it takes time. ROI is measured on a trailing 12-month basis, we would expect ROI to flatten by the end of this financial year and start to improve during the course of the following year, which is exactly what we went through in a bit more detail at the year-end.
Great. Thank you very much.
We're now over to Chris Gallagher at J.P. Morgan. Please go ahead.
Good morning. A couple of questions. Just first around what you've seen within the yield number. What have you seen in the underlying rate? I know that may be quite difficult, but like for like piece of equipment. Then just on maybe different geographies, if you've seen any differences in the growth rates around those different geographies, if you could pull those out for us. Thank you.
Yeah. Hi, Chris. It's a good question. I know one of our peers has been a lot more specific in tiny movements on a monthly basis in the rate. We find that a hard concept to get our mind around because it's always going to vary. There is not a rate. There is a different rate for different customers in different geographies for different rental periods and different rental environments. Precisely what's happening in rates on a month-by-month basis really is quite difficult to measure. In the round, rates are broadly flat. They may be up a smidgen, but they're up a smidgen. As you rightly identify, it varies very significantly between geographies. One of the tough geographies, well, not surprisingly, Texas remains a pretty tough geography.
Anywhere up sort of like eastern Ohio around Appalachians, where there was, again, you had Marcellus and you had big coal mining industries. Those areas are difficult. Where rates are good, California, Florida, upper northwest, all good geographies all around the Carolinas and Alabama, that kind of area, rate environment is good. Again, it will depend on the segment. It is better around remodeling, entertainment, restoration, remediation. It is tougher in big contracts, long-term contracts with big construction companies. You'd expect that. If you think about it sensibly, we have, through this cycle, seen a seismic shift in the structure of this industry. A number of very large construction companies who historically owned equipment have moved to rental, either totally or to a much greater proportion.
We're at the stage where we are clearly, based on our performance relative to our peers, benefiting enormously from that shift. I guess the question is, if you look at this mathematically, you'd say, "What? Look at your volume growth. Look at your physical utilization. Why not put up rates faster?" There is some logic in that. Equally, what we're doing is we're cementing this structural change. Against those bigger customers with far lower transactional costs, then if you look at our returns, it makes a lot more sense for us to embed that structural change this cycle, during which period they will lose the infrastructure necessary to own fleets going forward. It makes more sense for us to do that right now than it does to necessarily get overly aggressive on the rates in that sector.
We need to compensate for that by getting rate improvements in other sectors. It's a complicated mix of sectors in geographies. Overall, if you look at our rates, they're about flat. If I was to really try and convince myself, I could convince myself they are up a smidgen, it's a smidgen and not worth talking about, to be perfectly honest. They're certainly not getting any worse.
Okay. That's helpful. Just one more then on M&A. If you step up a little bit this year, how do you see that going through the year? Have the multiples that people are expecting come to a more central place from your perspective?
Sorry, Chris, you just broke up for a second. Can you just repeat that question?
Yeah, of course. Just around M&A, it stepped up a little bit this year on how you see that through the year. Are multiples that the targets are expecting a little more sensible than they have been in recent times?
Yeah, no, again, it's a good point. As you can see here, we've done a little bit more than we did last year. I think we are predominantly new on value in terms of this type of strategy. If we weren't happy with the multiples, then nothing was going to get sold. I mean, we did have a bit of a Mexican standoff for a period last year. Look, we have now a very good track record from our greenfield and bolt-on acquisitions. We are as enthused as ever, arguably more so, about the structural opportunity in this business. As I said earlier, if you think about it, we've had a couple of years of good construction markets that you couldn't have a lower cost to finance and these great deals available from manufacturers, and yet our customers continue to choose to rent rather than own.
That is a massive structural shift that's taken place this cycle. I think it's particularly around certain products, therefore we are very keen to grow our footprint around those products, and that will form a big part of our Capital Day in October. Yeah, I think the likelihood is that we will do certainly more than we did last year, which isn't tough because we didn't do very much last year. It's just hard to be precise. You can't multiply what we did in Q1 by four and say that's what we will do. We have to land the deals.
Some of them have a long gestation period.
Yeah, they do have a long gestation period. We remain very positive about bolt-on acquisitions. I think, again, we'll share with you in October. I think we have a clearer view of when bolt-ons make more sense than greenfields. We've got a reasonable pipeline. Like I said, we won't get ahead of ourselves. We'll do all this in October. We now have a very clear path to get to 900 locations and increase our footprint by 50% by 2021. Now, 2021 is not so far away. We've already accomplished the first five-year plan, and we're now rolling into the second five-year plan with a lot more experience in doing what we do. A much better track record in knowing how to evaluate and integrate new businesses. Yeah, it's going to be more than last year. Hard to say precisely how much, Chris.
I'd love to tell you, but I just don't know.
Okay, great. Thank you very much.
We're now over to Justin Jordan at Jefferies. Please go ahead. Your line is open.
Thank you. Good morning, everyone. I just want to, I guess, explore a little bit more on yields correlating with our margins. Firstly, just on the rental yields improving from -2% in Q4 to -1% in what you just reported for Q1. Should we infer easing energy headwinds, or are there other factors at play here?
If I'm honest, I don't know. I know that's a terrible answer. I should have some wonderful mathematical calculation. It's down to mix. The problem is we have to quote a quarterly single figure to you, which in all honesty is meaningless. The number which we can't share with you, as we might as well just give you all of our management accounts, breaks it down by product, by sector, by geography, and that then is a meaningful number. As much as anything, Justin, it's just mix. Everybody wants to take every single tweak in every single metric and extrapolate it into a cycle or into a trend, and it's just mix. The rates certainly have not got any worse. The mix clearly must be a bit better because the numbers have been better, but that's all it is, Justin. It's just mix.
Just a quarter ago, you were talking in terms of yields for fiscal 2017 overall being certainly better in the second half of the year than the first half of the year. Is that still your view when you think about-
Yes.
-fiscal 2017 overall?
Yes. I think I said my guesstimate was it was going to be nought to minus one. If I had to pick a number, I would have picked nought. We would carry forward the negative numbers we had in Q4 into Q1, Q2, and it would get better in Q3 and Q4. That still is my view. That's certainly how it feels. In fairness, it was a slightly dodgy answer because I knew I had up my sleeves the fact that we had no heat in quarter four, therefore, unless we had a really warm winter again, I'm going to get a kicker in Q4 just because of heat. It was a reasonably safe bet that it would get better in Q4, and I would have less of a negative headwind in oil and gas.
I'm not sure it necessarily tells you very much about the trajectory of the market, the market's fine.
Okay.
Look at the margin. The key to all of this remains margin, which is why would we not cement this structural change with some of those key accounts right now when we are delivering the sort of drop-through that we are delivering? If you think about it, 71% drop-through is a phenomenal number. Clearly, our margins, it's just math. Our margins have to continue to improve. Remember, both in the A-Plant and the Sunbelt margins, we have no exceptional costs. We have done all of the costs of our greenfields, all the costs of our acquisitions, any restructuring within those acquisitions are all included in our 65% drop-through that we quote as a whole. The incremental margin on this organic structural growth is remarkably high, and that's why we think it is both very profitable growth and very responsible growth. What's irresponsible is big speculative M&A.
What we will continue to do is small, sensible M&A and significant levels of organic fleet growth .
Okay. Just, sorry, I just want to carry forward on that drop-through. You're obviously very impressed with 65% drop-through to EBITDA in Q1. Just want to clarify, you're very comfortable people modeling whatever, 60% plus for-
60% we-
-for fiscal-
We must have been saying model 60% drop-through for about the last five or six years, and it's always been around about that number. There's going to be years when it's 58, and there's going to be years when it's 62. We have consistently delivered 60% incremental margin, and that is why, over time, quite naturally, obviously, there's a drag from greenfields and bolt-ons, but naturally, our margins will continue to improve. Of that I have no doubt. You raised a good point, which is as we start moderating our fleet age, and as greenfields and bolt-ons become a smaller percentage of the whole, that will also improve return on investment. There is a hiatus around fleet age at the moment, but that will improve. That's our job.
Our job is to grow the top line, gain market share, improve margins and return on investment. Our job is not to improve yields by two-tenths of a % on a monthly sequential basis. That's a nice thing to be able to do, but it's not why we're here.
Okay. Just one final mechanical question. Obviously, you generate 91% of profit in US dollars. You report in sterling. FX is whatever it'll be, who knows. Could you just remind us what the sensitivity is on an annualized basis of, let's say, a 1% movement in FX to reported sterling profits?
Sure, Justin. A 1% change in the exchange rate is about GBP 6 million of PBT.
Okay, thank you.
We are now over to Andy Murphy at Bank of America Merrill Lynch. Please go ahead. Your line is open.
Morning, Jeff. Morning, Suzanne.
Hi, Andy.
Hi. Let's talk to three. Just wanted to follow up on the same-store growth slide 21. Just interested in the structural share gains. Just wanted to try and understand why that appears to have dropped from around about 6%.
Yeah.
-half to-
In all honesty, it's a rubbish slide, this. It doesn't include the adjustment for the billing days. The truth of the matter is it should be +8, and it should be +4 and +4. If you go back to 11, then our same-store growth on a like billings today basis, excluding oil and gas, is 11%. It's 10%, sorry. 11% volume minus 1% yield, so it's 10%. Look, we are broadly growing at 2 times the pace of the market still. That slide in the back was quite frankly, I thought I'd said it couldn't come out, and we obviously I didn't. It's kind of misleading.
Right. Okay, thanks. Secondly, another point of clarity. The oil and gas issue, has that broadly fallen out or about to fall out of the comps?
It's about to fall out. I was looking at the numbers. If I look at fleet on rent for the quarter, volume was down 33%. I know I looked at it yesterday, and I'm not saying this is accurate, and it was down 20. I would guess yields will be falling, too. Quarter 2, it's a drag, but it'll be a significantly less drag. Instead of -46, it might be -30 or something like that. Then it gets 15 and 10. It's still going to be a drag, but it's going to be a much smaller percentage on a much smaller percentage of our business. It just kind of drifts away, Andy, as the year goes by.
Okay, perfect. My final question was just a little bit of color around the competitive environment here and a little bit of noise saying that people are investing and the market's quite competitive. Is that really your take on it? You obviously spend a lot of time talking about you.
Yeah, no, we do. If you look at our two largest peers, all of the listed peers, they're not spending, and they're a reasonable percentage of the market. Are some of the small and mid-sized guys spending? Yeah, absolutely, of course, they are. The market's good. They are optimistic about the outlook as we are because they've just seen the backlog of activity. They see the projects that are scheduled. The danger is, particularly certainly U.K., I can understand why there is angst about where the U.S. economy is. I fully accept there is a whole range of data points, and month on month, they can be somewhat contradictory. It is difficult. We sit and look at it and are equally perplexed by some of the numbers.
We have the benefit of having so many feet on the ground out there who are talking to so many customers and seeing what's actually happening. There's lots of activity out there. Yeah, I think the small and mid-sized guys are spending more than they did because they can, because they've had a period of very profitable growth. The market is growing much better than our listed peers would suggest. Therefore, yeah, they're spending more. Is it materially changing the dynamic? No, I don't think it is because their reach and their access to certain accounts is somewhat limited. As you know, we've had this discussion for over 18 months now. I have never bought into this broad brush view that there's an oversupply of equipment.
I think there is in certain geographies and certain products, I think that is absolutely true, but across the vast majority of products and geographies that we serve, I think the market's just fine. This is fantastic. Have we got a complete and utter open goal, which we probably had two or three years ago? No, it's not as good as that, but it is still very solid.
Would you characterize the spending by the smaller guys as more replacement and less growth or more growth and less replacement? I guess they've been denied access to capital for quite a long time.
I don't buy that. They haven't. People have been throwing money at them for about the past two years at almost zero cost. People have been very responsible in how they have grown, be that our smaller competitors or our customers. I'm sitting across the table here from Suzanne. We get money thrown at us like it's going out of fashion at the moment, and everybody wants to give us really cheap money. That's no reason to take it. The same has been true of our smaller competitors. I think they've had access to finance now for quite some time. I think they're growing sensibly. I think a good mix of it is replacement. Of course, as time goes, if you look at the average fleet age in the industry, it's still relatively high. A goodly proportion of it is replacement.
Of course, some of it's growth. Just look at I know percentages get smaller because of our scale. Just look at the quantum of incremental fleet we've got on rental. It's a huge number. Clearly the market's not sorted out. Yes, of course, some of our smaller peers are spending money. Some of our larger peers, given their sector difficulties, are choosing not to. Given their returns and given those sector difficulties, that makes all the sense in the world. Yeah, it's a good market, Andy. No, we aren't the only guys in town who are growing. That's absolutely true.
Thanks, Geoff.
We now go over to Andrew Farnell at Morgan Stanley. Please go ahead.
Hi there, guys. Just a quick question. I just wondered what factors would you need to see to raise the actual CapEx guidance range that you've got? Is it just about getting more visibility as the year end approaches?
Yeah, it's exactly the latter, and that's absolutely spot on. Clearly, our growth CapEx is at the upper end of our range. Clearly, we came into this year saying that we predicted volume growth somewhere around double digits to mid-teens. We're clearly very comfortably at the upper end of that. Let's not forget, A-Plant is performing very well, too. Therefore, that would indicate the potential for raising our guidance. Why would we not? People are right. There are contradictory data points. We've just had Brexit. We've got a U.S. election in November. We typically start doing our spring, summer 2017 planning around November and December. Our view is why not wait and be a little bit more precise in December rather than try and take a stab at it in quarter one. It's no more than that.
Then just the other question. What's the difference between the 79% drop-through in the statement, and the 71% on the same store? Is that not a like-for-like number?
Interestingly, the 79% includes oil and gas. The 71% excludes it. It is just the difference between what is included and what isn't. It would seem odd to think about the inclusion of oil and gas actually raising the drop-through level. But it is the math around how it works. In oil and gas for the year-over-year period, revenues declined, but all of that revenue didn't fall through to the EBITDA line because we had a significant amount of cost reduction. The inclusion of it just moved those numbers around a bit.
Okay. All right. Thank you.
We now go over to David Phillips at Redburn. Please go ahead.
Good morning, everyone. Could I just ask about the margin in Q1? You made the point very clearly on the trading day situation, presumably, your cost base was the same as it was last year. Actually, the 10 basis point margin improvement in the States as you go into Q2 will be slightly better year-on-year in terms of margin growth, just purely because of that trading day situation.
No, it does have an effect. Yes, generally speaking, but of course, some costs are just apportioned evenly through months irrespective of days, and some costs actually are incurred as they are incurred. You can't adjust everything. You do see the difference. It's a big explanation of why hasn't EBITA margin improved to the same extent as EBITDA margin. It's because we just charge depreciation on a monthly basis, therefore you've had the full month's depreciation charge, but you haven't had the two incremental days revenue, and therefore EBITA margin would improve. The biggest difference is depreciation. There are one or two, I'm going into territory where I know I really am trying to hand over to Suzanne.
I'll stop you.
Some costs clearly are direct costs which are incurred as they're incurred. Some are evenly apportioned through a month. There will be some effect. It'll be more on the EBITA line than it will be on the EBITDA line.
The best other example of cost, Dave, other than depreciation, it's when you think about people who are on a fixed salary. That's a fixed amount for the month. It doesn't vary based on the number of revenue billing days that you have, as opposed to what you pay your drivers and mechanics, for example, which would vary with the amount of activity.
It just feels like momentum will start to build again in that as we go through the quarters.
Yes. That's absolutely true. For a whole host of reasons, given the two extra billing days and for the point you made, August is going to be this bumper month. Typically, October is our best ever profit month. There's every chance in the world that it could be August this one. In fact, every star is in alignment from both a cost and a revenue perspective. I haven't seen the August profit numbers yet, but I'm looking forward to it.
In some ways, the right thing, which you can't because you don't have the numbers, obviously, is put the month of July and the month of August together and sort of average them, and then you get something that is a more appropriate run rate, as I would call it.
Yeah. That's great. Very clear. Thank you.
We're now over to Rajesh Kumar at HSBC. Please go ahead. Your line is open.
Hi. Good morning. Just thinking through the point you made about the smaller players spending on CapEx. Presumably, in your experience, you've seen these players tend to run the assets longer than bigger players would. Unlike the bigger players, they are not enjoying the same CapEx holiday. They would be replacing stuff they bought in 2006, 2007, and 2008 now. Would it be a fair assumption that they're going through a replacement CapEx phase and get a CapEx holiday later, which is when their returns start improving? The second question, which is linked to the same issue. If we look at your incremental maintenance CapEx, obviously it's gone down because you're doing the replacement CapEx on online assets and the return should improve. When should we think that replacement CapEx will start ramping up again?
Yeah. Okay. Your point about the replacement CapEx for the smaller peers is a very good one. Yes, they have been deferring replacement expenditure. As a consequence, they're selling very old assets. I think we put a chart out at the year-end, which showed the average age of assets being sold from Rouse, which showed that very point, that the average age of assets now being replaced in the market was older than it has historically been, and that's clearly the smaller guys catching up with replacements. That has a number of consequences. It means that it is a strain on their cash flow, certainly. Also remember, because they're replacing very old assets, and those assets are now Tier 4 engine assets, the number of assets that they can buy for the same quantum of dollars is significantly reduced.
People have to be careful when they look at spend levels, that they think of actual quantum of assets in the marketplace. For like levels of spend, the quantum of assets actually being replaced will be reduced by 25%-30%. Potentially depending on the mix of assets. What they're banking on, a bit like me, is that the cycle is going to be long and shallow. Long-term moderate growth, which will mean if they can catch up with replacement, perhaps get a bit of growth, they will then go into the next downturn with a younger fleet age. What they're looking to do is to have their CapEx holiday at the bottom of the next downturn, which makes all the sense in the world if you are running a small business and managing your own cash. You're right.
They are going to be using up a lot of cash right now. It does affect how much they can buy. In the main, we're seeing people doing it very responsibly. In terms of our older placement CapEx, we have a particularly low year this year. It will tick up a little bit next year. Again, I think we've had a chart in the year-end presentation, which is probably worth having a look at, which shows our fleet purchases by year of acquisition. That in all fairness, which I think we put it in because of questions you asked around fleet age. You can basically take that page, which I think is page 21 in the year-end presentation. You scroll forward seven years, and you can see our replacement cycle will look like our spend profile just moving that chart seven years forward.
If you look at it, we're now replacing what we spent in 2009. We're going to have a low replacement year 2010, relatively, a low replacement year. We've got probably two more years of very low replacement CapEx, and then it will start to ramp up.
Thank you very much.
We are now over to Rory McKenzie at UBS. Please go ahead.
Hi, Geoff. Just one from me. It might be a bit rambling though, so sorry about that. Actually, on page 23, looking at the ROI chart, it has been declining since 2014 and as the fleet profile normalizes and new stores develop that will help that. In terms of the 2021 plans, there is still an awful lot of new openings. I know the percentage growth is slowing, but there is a difference between how those new stores develop when they go into existing markets against new geographic expansion, and also the bolt-ons now increasing again as well. What does all that growing or even accelerating geographic spread mean for the group and ROI particularly other than just some new great CMD locations like Hawaii, which I am excited by?
No. It is a bit like Miami in February. We are guessing any capital market saying Hawaii will be well attended. It is a good question. The answer is we think we can strike a sensible balance where we can continue to add locations and continue to progress ROI. I would like to leave it to the 23rd of October to lay that out. You are absolutely spot on, which is the question now is the last thing I want to do is do the October presentation now. Quite frankly, when we started off this program four or five years ago, we could have chucked a dart at a map and probably be near the location there, and some of our planning was as sophisticated as that. Which is, hey, somebody wants a location. We know we do not have one there; let us open one.
It is now significantly more sophisticated, and as I said in introducing today, the key is clusters. The key is to what extent now are we going into brand-new geographies, which means it is a slower uptick, and to what extent are we going into existing clusters where the ramp-up is much quicker? You are absolutely right. We need to be now cognizant of that relative balance. We also need to be cognizant of things like there will be a downturn sometime. I appreciate there is a range of views on the U.S. economy, and who knows who is right. If we stick with our premise that you have got four to five years left, there is still going to be a downturn. Question is, where do you open greenfields and where do you do bolt-ons? What were our experiences through the last cycle in terms of which markets suffered the worst?
We are looking at where we put greenfields and bolt-ons now based on where we get the fastest return, where we have the lowest market share, and where we are likely to be the least cyclical in four or five years' time. I promise you we lay all of that out for you in October.
Maybe just one question now. Not to steal the thunder of October, but if you look at, say, Miami, where we were last time around, obviously you had a huge market share in that market. Is that basically you think you've kind of topped out in somewhere like that where you've been so dominant for so many years that's kind of off the table?
I don't think there's anywhere where we are topped out because for a whole host of reasons, not least of which, what we define as the market continues to change. That's the bit where I think people are missing the point in this whole structure. We probably thought we were topped out in market share in Miami five years ago, and we just keep growing and we just keep growing market share. Five, six years ago, we didn't have a floor cleaning business. We didn't have a climate control business. We have less of an industrial business. We had a smaller entertainment business in Florida five or six years ago than we've got today. A lot of it comes down to what is the market. Around large construction contracts, may we be topped out in Miami? Yeah, I think there is some potential in that.
The key is you have to look at this in terms of what our market is, and I think it's too narrow to look at our business now as a construction business. When you look at market share, when we talk about market share in October, we will show you market share where we strip out all of our specialty business. Our market share is a fraction of what we quote it as being, because we are in so many markets which are not included in the denominator of the calculation. No, we still think there's a lot of markets where we can gain further market share.
In terms of looking at returns and where we put greenfields and bolt-ons, when something like Miami, you're absolutely right, and we've got a number of these locations, would be our blueprints for how you should attack a major metropolitan area like Miami. You might have a different blueprint to how you approach Seoul, for example, because they are different cities in size, complexity of doing business. We need to break it out by products and by markets in order to show how we're so comfortable about our growth prospects and our ability to grow both margins and return on investment. We need to do that away from the results presentation, Rory, because there's an awful lot of detail involved. We're bringing Brendan and two of his guys over from the States too, so we can spend a bit of time. Your question is spot on.
It is exactly what we want to cover in October.
Okay, great. Well, I look forward to October then. Thank you much.
We are now over to the line of George Gregory at Exane. Please go ahead. Your line is open.
Morning, everyone. Two from me, then just following up firstly on the same-store yield dynamic. I appreciate that it is mixed. It is perhaps driving down same-store yields into negative territory. Just trying to understand really why mix would have got incrementally worse in the first quarter of this year if you had been driving key account growth through the duration of last year. I don't know if there is anything you can call out there. Secondly, just in terms of I know we've had a few questions around this, but in terms of the broader backdrop for the U.S. non-residential industry. I know we've talked about this in the past, if we look at the starts activity within your two key end markets, the commercial and institutional, they're down year-to-date, clearly last year was a pretty flat year.
Just wondering how you and the industry reconcile that with a robust future outlook. Do you, do the industry expect an upticking starts in the second half? If so, why? Just trying to square that circle because the two don't seem to quite sort of marry up very well. Thanks.
Yeah, sure. In terms of the yield, well, A, it's better than it was in quarter four. In terms of mix, look, you're right. Over a period of time, we have been adding more key accounts. The question is not how many accounts we've been adding, the question is what proportion of our work is that work? Clearly, when you add a new big key account, you are on a low runway to start with. You have to prove your capabilities. Clearly, we are gaining market share. We are growing. Well, we are growing, and most of our larger peers aren't growing at all. We're clearly growing much faster than our major peers, which means we are taking a bigger share of the wallet of those accounts.
If you take a bigger share of the wallet of those accounts, it is a bigger proportion of our growth, which is consistent with the nature of work going on in the U.S. at the moment. There is a lot of big accounts around. That's why. It obviously has an effect, which is more of our rentals are longer period, so we're doing more monthly billings, not daily and weekly billings. As we've showed you in the past, they are lower yield. If we're doing more longer-term transactions, clearly that affects our yield. There is this obsession with yields. Look at the margins.
The key to this is that we are offering lower prices for longer-term rentals than shorter-term rentals, which is being much more than compensated for by the lower transactional costs, either because inherently there's lower transactional costs or because we're more efficient. Everyone's got bogged down with this one measure. Look at the margins. Look at our share gains. Look at our revenue growth. We could not be delivering this revenue growth, apparently, with all of these statistics telling us how terrible the market is.
Jeff, what do you think, I know it's difficult, but what do you think returns are doing on a same-store basis at the moment?
There's no question whatsoever that they are improving. I would ask, this is a quick Q1 update. That's always the problem with the Q1 and the Q3s. I would suggest everybody goes back and looks at some of the charts at the full year, which shows how margins have evolved in our mature stores. Nothing has changed in this quarter either. Look, if you are growing your top line at 11% and you're only adding 2% more heads, then your returns are improving in your exit. You've got 71% drop-through. In your same stores, you're improving returns.
Okay.
The second point in terms of the data points, our view is that there are lots of very inconsistent data. The weakened point, particularly when you get into Dodge, and we've had this debate before, you need to get into line items of Dodge, and starts are not as good as they have been say two years ago. Last year, starts were good in the sectors which we look at. I would recommend you look at buildings, you look at commercial and industrial, institutional and residential, and starts are fine. They're not great, but they're fine. You've also got the backlog. I'd also ask you to look at Dodge and look at the projected building starts for 2017 and 2018 too, which again, are very positive.
We are taking that data, and we're combining it with what we're seeing on the ground and what we're hearing from customers, and it is that way. No one is knocking the lights out in every sector, in every geography in America. That's been true for the last 12 to 18 months, there is good, steady growth. I would argue that good, steady growth is the perfect environment for us. It is not so good that people are being reckless with capital investment. It's not sufficient growth for our customers to change their mindset of shifting from ownership to rental. Within a 4%, 5% end market growth for multiple years, our biggest opportunity remains still shift to rental and our ability to take market share from our peers. In my opinion, this is the perfect environment.
If we suddenly got stellar growth with absolute clarity in terms of the outcome, everybody would invest more. George, I've talked to you about this many times. Over the last five, six years, what would have broken our model? An overinjection of capital in the supply side of the equation. Clearly, against the backdrop we're discussing, that is not the case and has not been the case.
Great. Thank you very much.
Okay. Our penultimate question is the line of Chris Callahan at Exane again. Please go ahead. Your line is open. Sorry, Chris Callahan, J.P. Morgan. I do apologize. Please go ahead.
That's okay. It's Tom Morgan from the U.K. I know you mentioned it's too early to make much of a comment, but if you could point to some of the things you see there. I think you have a bit more visibility in A-Plant and Sunbelt.
Clearly, we never talk about it. The U.K. is doing great. Brendan and Sat are downstairs at the moment because we've got our AGM this afternoon. I'm enjoying teasing Brendan with the fact that Sat's revenue growth's bigger than his. If anything's going to rip up the U.S. revenue growth, it is that comment. The U.K. is doing fine. We took a deep breath after Brexit and thought, "Well, what does all of this mean?" In truth, we eased back on a little bit of capital expenditure and eased back on a couple of store openings just whilst we assess the situation. A lot of our growth in the specialty sector, Wimbledon is going to happen, Glastonbury is going to happen. All of these events are going to happen.
People are going to need power, people are going to need climate control, whether there's a strong market or not, we continue to invest in specialty. We've seen very little to date. We have heard rumblings and concerns, we haven't seen anything suspended. We haven't seen anything that we expected to start to start, probably with the exception of Hinkley Point, of course, that's probably not the most normal of projects. We've seen very little thus far. Our view would be this, is that we clearly have significant market share momentum. More importantly, we're making a profit, which is hard to find many of our, certainly our listed peers, who can say that. We're a well-financed and diverse group, therefore, we'll continue to take share whatever the market conditions are.
Genuinely, there's a lot of hot air about it at the moment, and we aren't seeing an awful lot. I don't hold with the view that, hey, look, it's September, we've done Brexit and nothing's happened, everything's okay. I think that's slightly premature too. It's also a bit premature to say just exactly what the consequences will be. As we said before, rental is a late cycle business. I'm sitting here looking at the London skyline with cranes everywhere. All of those projects are going to finish off, therefore, we will be busy on those projects. The big question will be two years out, what's going to be on the drawing board two years out? We just don't know that at the moment, Chris. We really don't.
We remain watchful in terms of what the conditions might be, we also remain very optimistic about our relative strength to prosper in whatever the market conditions are.
Great. Thank you.
The final question today is from the line of Karl Green at Credit Suisse. Please go ahead. Your line is open.
Yeah, thanks very much. I've got a question for Geoff and one for Suzanne. Geoff, just in terms of your comments around construction labor skill shortages, and let's assume that the cycle does continue for another four to five years, and therefore potential wage pressures could build. Do you think that you may see some pressure down the line from the bigger construction clients who might be feeling some margin squeeze, and then potentially looking to diffuse that via lower rates across the market, not just for you specifically? Is that something you lose any sleep over? And then secondly, just to Suzanne, much more prosaically, given the FX movements in particular, could you just give us an update as to where you think full year interest charge should be sitting?
Yeah, Karl, let me answer the question. It's a good question. I think sitting down and contemplating what labor shortages mean to businesses is a very worthwhile exercise. I do think you'll see wage inflation. I think we're seeing it already. Again, amongst the negative points around the U.S. economy, I think the level of disposable income for employed people in America now is very high, and that's very positive because there has been a 3% wage inflation, which is very positive. Yes, I mean, clearly that wage inflation, people will look to defer it in some ways. Yes, that may well indeed put in a bit of price pressure. I think the counterbalance to that is, as I sat and thought it through and modeled it, which is, look, you just can't get labor. Look, what you need to be doing is recruiting core mission-critical skills.
Anything to do with owning or renting assets is non-core, non-critical because there's a very capable supply base available to supply to you. I think, yes, I think it comes back to this whole dynamic of the structural shift in rental in terms of what does it mean for volume, what does it mean for transactional cost, what does it mean for rates? I think the answer is possibly yes, that would be logical. I think the counterbalance clearly would be that if you can't get labor, you are going to outsource more. It's a valid consideration. Hard to know precisely how it'll play out. Yeah, it's something we think about a lot because we look at our own labor. The question is, what is our core skills? What is our non-core skills?
All through the supply chain, people will be looking to do that. I think outsourcing businesses generally where they can have economies of scale in a core activity will prosper in that environment.
Understood. Okay. Thank you.
With respect to the second part of your question, depreciation for the year, we are predicting that that will be around GBP 575 million. For interest expense, around GBP 103 million. Those numbers have been derived based on our set of assumptions in which we use a 1.34 exchange rate for the full year. To the extent you use a rate that is different from 1.34 for the full year, then obviously that would have a bit of impact on those numbers. At GBP 575 and GBP 103, in that neighborhood, you shouldn't be too far off.
That's very helpful. Can I just clarify just for the interest, that's assuming share buybacks executed year to date, not anticipated buybacks further down the line.
That's right. You'll note that the interest expense number nudged up by maybe a GBP couple million, excluding FX from the guidance we had given at the end of the year. That reflects the M&A activity in the first quarter, and it also affects the buybacks to date.
Great. Thank you.
Sure.
Jane, can I just pass back to you for any closing comments at this stage?
No, thank you. [Hugh], just say it once again, thank you everybody for their interest in the company. We are really looking forward to seeing you all in October where we can, away from results, talk about some interesting evolution of the business. We will see you all in October. Thank you very much indeed.
Great. Thank you.
This now concludes the call. Thank you all very much for attending, and you may now disconnect your lines.