Bodycote plc (BOY) Earnings Call Transcript

Good morning, and welcome to Bodycote's 2025 Interim Results. I'm Jim Fairbairn, CEO, and I'm pleased to have with me our CFO, Ben Fidler. I will kick off today with a summary covering the strategic progress that we've made in the first half of the year, and the context in terms of our end market environment. Ben will then take you through the half year results in more detail. And I'll come back and take you through an update on how we're executing the strategy, the benefits we're now beginning to see and our outlook for the full year, where we remain on track and in line with how we're executing the strategy, the benefits we're now beginning to see and our outlook for the full year, where we remain on track and in line with expectations. So to start with some key points about the first half. We have made some important strategic progress on all of the areas we flagged at the Capital Markets Day and at our full year results in March. And that's against the backdrop that has been one of challenging end markets. In terms of the first half highlights, Firstly, as I said, market conditions have been very tough. But sequentially, we've seen 4% growth in revenue versus the second half of last year. And I have been pleased with how we have executed, particularly in Q2. Secondly, we're really happy with the momentum of the Optimise program, and we've decided to expand it. Ben and I will talk about that later. In short, we are increasing the benefit and significantly reducing the cost. Then on growth, whilst this period was challenging, and we're still sowing the seeds for future growth through our investments and M&A activity. I'll talk about some of our current organic investments later. Today, we're also announcing a further GBP 30 million share buyback. The strong financial characteristics of our business means that we can invest well and, at the same time, provide shareholder returns. And our full year outlook remains unchanged and with an improvement in profit expected in the second half. So overall, I'm pleased with the progress we've made in difficult markets and encouraged by our operational response. This gives us confidence in our medium-term targets. Looking at the end markets. I want to give you the context for our first half performance. So the left-hand chart shows it was a challenging period. Year-over-year, core revenues were down 3.6%. And we saw growth accelerating in Aerospace and Defense, as expected, up 3% year-on-year. And remembering, that's against a strong comparator. Clearly, market conditions in Industrial and Automotive were tougher. Energy revenue was down 12.9%. This was largely expected as we flagged several oil and gas contracts that ended in the second half of last year. Moving to the right-hand chart. This chart shows our sequential growth versus the second half of last year. And overall core revenue was up 4%, and there was a sequential momentum in almost all of our key end markets. And although we do typically have a slight bias towards the first half and the growth rate we've seen has gone beyond that. Most markets have stabilized and have improved from what was a weak base in the second half of '24. And although though automotive and general industrial are likely to remain challenging. We did improve sequentially there. However, it just remains too soon to call any type of recovery. But we expect continuing momentum in the second half in Aerospace and Defense. Therefore, it's key that we continue momentum in the second half in Aerospace and Defense. Therefore, it's key that we continue to focus on controlling what we can control. And with that, I hand over to Ben to take you through the detail of the half.

Well, thank you, Jim. And just to add my welcome to all of you. Thanks for coming along today to the new venue. I'm now going to spend a few moments just talking through in some more detail the key elements around the financial performance that we delivered in the first half of the year as well as taking a little bit of time just to dig into some of the more detailed aspects of our technical guidance for the rest of the year. So let's start off with a reminder of some of the key highlights of the numbers. As Jim said, some challenging market conditions compared to the first half of last year saw core revenues decline by 3.6% organically, sequentially up just over 4%, but clearly down year-over-year. We worked hard to manage costs while also maintaining the capacity that we need and are going to need in Specialist Technologies for the high level of activity that we can see there in the second half of this year. But as a result of the lower top line, core margins were down 220 basis points to 15.4%, reflecting the lower operating profit as well as the higher tax rate. EPS fell to 21.3p, and as you can see here, cash conversion remained healthy at 68%. Leverage remains very comfortable at 0.6x. That's 0.3 turns higher than the year-end as we executed on the further share buyback in the first half of the year and paid the final dividend in June, taking total shareholder returns for the period to GBP 60 million. Now let's delve into the numbers in a little bit more detail on this next slide. Firstly, focusing on the core business, a 3.6% organic revenue decline in the period. That reflected challenging market conditions and delivery phasing in Specialist Technologies this year. On that lower revenue base, core operating profit fell by 14.7% organically, as you can see here, the GBP 54.3 million, margin of 15.4%. Margins will improve in the second half as divisional mix improves and also as optimized benefits ramp up further, but more on this in more detail from Jim later. Secondly, looked out through the group lens, including our noncore activities, revenues were GBP 369 million, down just over 4.5% organically, with group operating profit of GBP 55.1 million, a margin of 14.9%. With higher financing costs and a 70 basis point increase in tax rate, together with the lower share count, benefiting from the share buyback, adjusted EPS fell 15% to 21.3p. And despite the lower EPS, the interim dividend was held stable at 6.9p. Next, I want to look at the key drivers of the group's operating profit performance. I'm going to talk in a moment more about the divisions in more detail. But as you can see here, looked at in aggregate divisional profit fell by a combined GBP 11.4 million. That reflected the lower volumes, both in Specialist Technologies and also in Precision Heat Treatment. Noncore profit was unchanged over the prior first half. That's despite the decline in revenues in noncore. Why is that? Well, it's primarily because we focused our site closures, as you'd expect, on the most underperforming and loss-making locations in the first half. Central costs, as you can see here, were GBP 1.7 million lower. That reflected overhead savings, together with lower incentive share-based payment costs. And finally, foreign exchange had about a GBP 2 million headwind to profit in the first half of the year, primarily movements in the euro and dollar, all of which put it all together, led to the delivery of our GBP 55.1 million of group operating profit. Let's now turn to look at each of the 2 divisions, the core divisions in a bit more detail. Compared to a strong prior year revenue comparator, Specialist Technologies had quite a challenging first half. Revenues, as you can see here, down 7.7% organically, of what was you can see from that bottom left-hand bar chart, a particularly high revenue base in the first half of 2024. That was, though, nonetheless, an improvement from the negative 11% revenue, you may remember we reported at the May AGM trading statement for the first 4 months of the year. May and June did improve, in fact, May and June revenues for Specialist Technologies were flat year-on-year showing improved momentum as we went through the second quarter, which we're confident will carry into the second half of the year for this division. Looks at by end market, Aerospace and Defense growth was good, up over 7%, with a nice acceleration in particular, being evident there in the second quarter. But other markets were challenging. Industrial suffered a material decline in the more CapEx-driven end markets such as extrusion and tool steel. Consumer, medical and other remained weak in Specialist Technologies. And as expected earlier in the year, energy was impacted by the end of a sizable oil and gas contract in our surface treatment business. Now we've worked hard to replace much of that lost work, which will ramp up as we go through the second half of this year. Finally, there was also a phasing impact in HIP product fabrication where delivery volumes will be unusually second half weighted this year. Margins in Specialist Technologies were lower, not surprisingly impacted by the revenue phasing we saw here, but still good at over 25%. So as we look to the second half of Specialist Technologies, we've got good line of sight for growth and performance to improve significantly. Aerospace supply chains should continue to improve. We very much saw that in the second quarter and that will carry that momentum into the second half. Also revenue phasing on HIP product fabrication contracts will ramp up, a lot of that is in our backlog and the ramp-up of the new oil and gas work that we've won on surface technology will also feed into the second half growth. Turning to Precision Heat Treatment, a resilient performance in the face of some challenging end markets. On an organic basis, revenues fell 1.8% to GBP 246 million. With growing volumes of IGT work within our energy subsegment, growth in aerospace, in consumer, medical and other offset by weakness in automotive and industrial markets. Sequentially, Precision Heat Treatment revenues were up 7%, which is ahead of our normal level of seasonality and did compare to a particularly soft level of activity in the second half of 2024. We took a number of actions to manage the cost base carefully here. And although margins fell on the weaker top line, they were maintained at over 14.5%. Let's look at cash flow. So we delivered cash flow in line with expectations in the first half. As you can see here, adjusted headline operating cash flow of GBP 38 million. That was a decline of GBP 11 million year-over-year, but entirely reflected the lower level of profit and was achieved despite a 10% increase in capital expenditure. Cash flow was also helped by the nonrecurrence of the provision outflow that we'd seen in the first half of last year. Overall operating cash conversion stood at 68% below last year, but in line with normal type of first half levels for Bodycote. Restructuring spend rose to GBP 7 million, as you'd expect, as we deliver and execute at pace on the Optimise program. And finally, cash tax was back to a more normalized level of phasing after the unusual weighting that we had in the first half of 2024 when some prior year payments fell due. Overall, this left free cash flow at GBP 18 million. After executing GBP 30 million of share buyback in the first half and payment of the final dividend in June, net debt at the end of the half rose to GBP 112.4 million. That's a leverage increased slightly, but still at a very comfortable 0.6x net debt EBITDA towards the bottom end of our 0.5x to 1.5x target range. We continue to apply a disciplined and balanced approach to capital allocation, exactly what you should be expecting us to continue to do at Bodycote. CapEx rose by 10% to GBP 38 million, as we drive investments in future growth to enable and to enable continual operational improvement, both of which are key to our strategic execution and delivery levers. Dividends were paid of GBP 29 million, and you heard earlier, the first half dividend held flat at 6.9p per share. And finally, GBP 31 million deployed on share buybacks. We do continue to progress well on building our M&A capabilities to support and to drive our growth strategy. But based on what we can see in the pipeline in the near term, together with the strength of the balance sheet, we've announced today a further GBP 30 million share buyback, which is an attractive use of capital to drive value. And finally, I know your summers wouldn't be complete without your technical guidance slide. Some details to consider here then as you just revisit and build out some of your forecasts for 2025. I'm not going to step through every single one of these. A lot of them haven't changed compared to what we talked about in March. But just a couple to draw out. Firstly, on foreign exchange, rates have been fluctuating, as you know, quite a lot recently. And if maintained at today's levels, this means we could well see a larger headwind than we'd flagged in March. We now expect potentially a GBP 3 million profit headwind from FX, more than half of which was felt in the first half. Secondly, due to the additional GBP 30 million share buyback that we've announced today, our guidance for share count and interest costs have also modestly changed compared to what we said in March. With that, I'll hand back to Jim now to cover the update on strategy and to focus more on outlook. Thank you.

Thank you, Ben. And as I said earlier, what's one of the most pleasing aspects about the half is the strategic progress we've made across the 3 legs of the strategy. As you know, Optimise is about enhancing the quality of our portfolio. As you'll recall, this involved exiting around 10% of our sites and just over 5% of our group revenue which was lower quality and lower margin. We are progressing well and are ahead of plan in terms of cost efficiency and time line. We have also decided to expand the scope of the program, and I'll give details on that shortly. Perform focuses on identifying areas for performance excellence and also driving internal best practice. We execute this through the heat framework, and we continue to make progress on a daily basis of each of the elements of heat. And that's an important distinction. Every day in Bodycote, teams are working on each element of heat to make us better and I'll give a really good example of this later. And our priority and grow is about driving organic growth and improving the overall business mix. And as you know, 65% of our business is at hand improving the overall business mix. And as you know, 65% of our business is in higher growth, high-margin markets. Our strategic actions will get that to at least 75% in the medium term, and I'll come back to some details in a few slides. In May, we launched our Carbon Smart program, offering customers a reduced carbon footprint for their in-house heat treatment. So we're in a full engagement mode now with many European and U.S. customers. As Ben mentioned, our acquisition pipeline is also very much focused on this high-growth, high-margin area of our business. And whilst nothing is imminent, we've continued to make good progress on building the pipeline. Moving to Optimise. And at the recent AGM statement, we signaled we saw the potential to expand the scope of the Optimise program. And we've been doing lots of work in the background, and now we're confident of being able to deliver an increased benefit for a significantly reduced cost. Let me take you through the key changes in this graphic at the bottom of the slide. And as you can see on the far left, the original program involved around 20 sites, and that was set to deliver GBP 12 million to GBP 14 million and recurring benefits for a cost of GBP 25 million to GBP 30 million. And let me step through the red boxes. Firstly, improved execution we have been delivering well on this plan and have increased confidence in our ability to retain the planned revenue and to deliver at lower cost. We expect around GBP 5 million lower cash costs than initially guided. Next, we've expanded the scope of the original program. This partly reflects the increased confidence I just mentioned around our ability to execute site consolidations and also some of our end markets, particularly in areas such as automotive and Western Europe remain challenging. And with that backdrop, we've taken a fresh look and expanded the scope of the program with some additional sites and also some further overhead reductions. This will cost around GBP 10 million and delivers an attractive payback. Thirdly, we also looked at other execution options, including divesting some sites and we've been able to further reduce the cost of the program. We've entered into a contractual process with a buyer for a package of automotive and industrial sites in France. The expected proceeds are around GBP 20 million for a package of sites that we're generating lower than group average margin. Put all of that together and on the right-hand side, you can see the new program. We will be exiting around 30 sites, which is about 20% of our portfolio. These sites have revenues of around GBP 80 million and we aim to retain around 25% of these revenues. So the full program will now give us run rate benefits of at least GBP 15 million by mid-2027, and the net costs are considerably lower at GBP 10 million to GBP 15 million. For this year, we still expect profit benefits of GBP 4 million to GBP 5 million. Moving on to perform. Let me pull out an example of heat and action. This is a site in Minneapolis, and I visited it as part of my in action. This is a site in Minneapolis, and I visited it as part of my induction program in early 2024. We have a very forward-thinking General Manager who likes impact and his plant became part of our initial lean management pilot site program in the middle of last year. That initial program was about implementing daily management that's safety, quality, delivery and cost improvements daily. The site has implemented superior workplace organization or 5S in lean management terms for the gurus as well as some other lean tools, including visual management. And what you usually also find is that there are process deficiencies upstream of the core processes that you are trying to change. And we found some here in order entry and in scheduling that the team fixed. With some additional selective small investments, turnaround times have improved by over 20%, and on-time delivery in full has improved by 6%. This type of focus is also a huge sales differentiator. And it helps us get more utilization through our asset base. And it keeps our teams focused on what really matters for our customers. And we continue to progress and roll out heat as a multiyear program. Examples like this one show that the benefits of tangible and these sort of actions are applicable to most of our sites. Moving on to growth. I want to give you an example of where we say we are targeting high-growth markets. What does that really mean? And here's an example in aerospace and defense, which, as you know, is around 1/3 of our business. And here are some of the things that we're driving. Number one, we are improving the quality and structure of our sales teams, and ensuring that the wider Bodycote team on an interdivisional basis is always putting the best unified position forwards on all our services to the customer. So enhancing on sales capability on cross-selling has already yielded results. And one of our key target areas is the Pratt & Whitney supply chain, and we've just managed to secure a long-term purchase agreement with a Tier 1 supplier there with this approach. In terms of organic investment, we're in the process of 2 major U.S. upgrades, essentially creating 2 entirely new expanded aerospace and defense sites that will give us significantly extra capacity. We can see from our customers' order books that the demand picture is good, and we are positioning ourselves for that. Thirdly, we think there is untapped opportunities around how we can combine our services for our aerospace customers. It's specifically beneficial for additive manufacturing in aerospace and for industrial gas turbines, and our customers have been inquiring about it for some time. So as you can see, we are laying the foundations for an acceleration in growth going forward for these target markets. It's really about very specific and targeted investment that will deliver for the customer. And moving on to confidence in the second half. As I said earlier, we see increased second half profit, second half profit, and that's for 3 key reasons. Firstly, the market environment. And whilst there is clearly uncertain macro outlook, we expect continued growth in aerospace and defense and industrial gas turbines. We saw some of that coming through already in May and June. Secondly, we see profit improvement in Specialist Technologies, reflecting the recent order wins. And the HIP PF business order book has benefited from a sizable win in U.S. defense. And the team in surface treatment have been working hard to backfill with oil and gas projects from the Middle East. And lastly, because of the Optimise program we are successfully delivering, we expect benefits to ramp up in the second half, and we have enacted the majority of the overhead savings towards the end of the first half, which helped underpin the full GBP 4 million to GBP 5 million full year benefit. Taking all of these elements together means our full year outlook is unchanged, and we remain on track and in line with market expectations. We remain focused on operational delivery and also strict cost control. We will improve operating profit in the second half, and we will continue to progress at pace on Optimise, Perform and Grow. We remain focused on creating the higher quality, more resilient and faster growing Bodycote, and remain confident in the delivery of our medium-term targets. With that, we will open up to questions. And for those of you listening online, you can submit questions via the webcast service. Thank you.

Andy, do you want to go first?

I've got 3 questions. Do you want to do one at a time or you. Let's crack on then with Optimise. Can you help us understand 2 things within Optimise? What exactly is it that's allowing you to execute ahead of plan from a cost side? I think you took GBP 5 million. Is that conservative guidance? Or is it -- once you start, you realize that actually there's more opportunity? What's driving that improvement? And secondly, the scope, you've increased the scope. Why is that? And is that all that you now need to do given the current market environment? Or is there scope for more scope? Second question is on capital allocation. GBP 30 million buyback, yes, very sensible. But you also talked about the pipeline and the M&A pipeline. I just really just want to understand really how that's building and what is the aspiration here? Clearly, you got a strong balance sheet, you can do a lot with it. So I just want to make sure I understand kind of where we're at in your thought process. And then last but by no means least one for Ben on cash, not on cash tax. On the second half guidance, clearly, we've got Specialist Tech is a big chunk of that second half improvement? I just want to understand the confidence maybe now compared to May or confidence that some of that slippage we've seen in the second half doesn't go into '26?

Okay. Let me take the first 2 then Ben and pass to you. I think in terms of the Optimise program, I mean, we're very happy with progress. As you say, Andy, we're executing at lower cost. I think we're on track at being able to retain the revenues that was in the model. And that's obviously a key part of the improved profitability and margin. I think what's -- 2 things. I think we've actually realized that if we moved at pace in terms of the site and also in the overhead, then it just brings us more confidence about executing. And the other point of execution -- I mean, execution is that we put in a very robust program management framework this brings us more confidence about executing. And the other point about execution -- I mean, execution is that we put in a very robust program management framework [indiscernible]. And I think that has been kind of very important for us. I think we've always wanted to be proactive around the Optimise program and be on the front foot. So therefore, we took a fresh -- as I said in my prepared remarks, we took a fresh look, considering the underlying market base, especially in automotive and general industrial. And we saw the opportunity to -- because of the confidence we had in execution of expanding that program, and we have expanded the program and we've also kind of divested. So the upshot is that we will deliver more and it's going to cost less. That's -- this is the program. So unless there's material macro checks, which none of us can predict, then we expect that this will be a final part of the Optimise program. Just on your M&A, comment question, sorry. I mean M&A is actually an important part of the growth story going forward. Ben and I both said that we're increasing the pipeline there. So we haven't got any deals imminent at all. The key thing about the pipeline is that it's targeted, focused and also high quality. And it has to be aligned to the strategy and it either has an element of structural growth quality or some kind of technical differentiation or a combination of both and that's building that pipeline, building the relationships, talking to people does actually take time. But we will make -- I'm sure we take our time, but do it properly and be disciplined around the capital requirements can afford that. The Board continually reviews capital allocation acquisition pipeline. We have very sensible, robust and quite insightful discussions. And I'm really happy that we're all aligned on acquisitions going forward. The sweet spot for acquisitions for us is for the lake cities, and that's really what we're trying to build into the pipeline.

I'll pick up on the question about sort of second half guidance and our confidence levels around that and why. So essentially, there's probably like 3 or 4 main buckets and drivers of that, which we did lay out one of the slides, but just to step through those and maybe lift the lid a little bit more. There's the Optimise benefits. As you heard everything we're saying, we're executing well, it's on track. And for the full year, we're very confident in delivering around GBP 4 million to GBP 5 million profit benefit from that, of which you saw probably about GBP 1 million in the first half of the year. So quite a significant level of ramp up in the second half. That's kind of the first bucket. Secondly, there's the aerospace improvement, which, again, your question was, well, how did our confidence factor sort of compare to May. Much more confident about aerospace. It wasn't that we weren't confident in May because the fundamental demand is 100% there in the aerospace industry, supply chain having a few challenges of getting its act in gear. What we clearly saw in May and June was quite a material improvement in the aerospace end markets. So remember, in the first 4 months, aerospace was up just under 2%, was up almost 6% in May and June. So that gives us incremental confidence that the momentum in aerospace can and will continue through the second half. And then the third piece that we've already touched on in the presentation a bit was really in Specialist Technologies, in HIP product fabrication, which is probably our most backlog-driven business. Jim referred to that $10 million. The presentation a bit was really in Specialist Technologies. In HIP product fabrication, which is probably our most backlog-driven business. Jim referred to that $10 million order for defense equipment for valve parts used in naval industry and things that might go spend more time under the sea and on top of it. And that was only secured in sort of midway through the first half and more than half of that will trade this year, none of which traded in the first half as an example. So it gives us confidence, things like that. As well as those oil and gas surface technology, new contract wins ramping up to replace the contract that ended. So Specialist Technologies, we've got a good line of sight that will get improvement there. And then the final driver, which is a slightly more arcane technical guidance you point, but it's just share-based payments. If you look at what it was in the first half, if you look at what we're guiding in the full year, it basically will be about GBP 1 million lower in H2 than it was in H1.

Jonathan?

This is Jonathan, Barclays. I just have 3 questions as well, please. Firstly, just in terms of those French sites. Can you just give us a feel for the absolute profit number of those? And as we look to '26, obviously, that's going to fall out what kind of savings are we going to get from Optimise in '26? That was the first one. The second one, was just about these contract wins at Specialist Technology, obviously, that's been good in H1. If we kind of look at the cadence of those contracts, are we kind of seeing sort of an uptick in terms of your win rate there? And can that continue going forward? And then thirdly was just in terms of auto, obviously, challenging end market down for you in the first half. Can you just sort of talk us through what's happening there? Are you managing to get market share? Are you managing to get into the battery electric vehicle sort of powertrain angle, which you were looking at quite heavily in terms of the Investor Day and just some color there, please.

Yes. I'll do the Automotive, Ben and then pass to you and for the other 2. Automotive, as a market is obviously remains challenging. We did actually see sequential progress, but I don't think that's any bellwether for recovery. It remains actually very difficult. We do have some bright spots in automotive. China and Mexico are our bright spots. In China last year, we deliberately changed the focus to domestic kind of targeted, and we also made a local management change. So the new General Manager there is actually a local Chinese who is amazing. So I think that was actually very good and China is growing very nicely. And the other market that is doing well is actually Mexico. Year-on-year, we're up just over 10%. And that has been from some program wins, local to Mexico. And we're not seeing any tariff issues there at all. And at some point, we're going to run out of capacity in our 2 kind of automotive sites. So the Board and I and Ben were debating a few weeks ago and how can I think about it. It's a good problem to have. Very different in the U.S. and Europe where light vehicle production is actually down low to mid single, broadly reflecting our performance. In fact, we're slightly worse in North America than we are in Europe, which maybe is a little bit of a surprise, but both are down very, very similar numbers. So we thought we had actually hit the bottom in the second half of last year. We must -- we think we must be around there, but we're certainly not calling any type of recovery. And certainly, in terms of our agnostic work, very much, okay, we're holding share. We're winning share in some programs. The most important thing for me that I talked to the teams is that we're not losing share, that's like leakage, we don't accept in the business, and I'm confident that's actually true.

Okay. Let me pick up on some of the others, and there was also a Specialist Technology contract win rate. Do you want me to pick on that?

Yes.

I have a think when I'm answering the first. So on the French side, can we give you an absolute profit number? Quite a simple answer, no, because of commercial sensitivity, but let me give you some parameters that may help you figure something out there. So what was the exit multiple on the sale? Not surprisingly, it is a little below the group multiple that we trade on. And that sort of shouldn't surprise you in the context of -- these are lower-margin sites, quite significantly lower margin than the group overall. They are auto and GI focused. And clearly, they are France, Western Europe focused. So structurally probably lower growth. But the multiple wasn't -- I mean don't -- it was lower than the group level of multiple, but we still think, actually, overall, we were quite pleased with the multiple we achieved on those, recognizing the genre of assets that was in there. And for us on the economics of the transaction, recognizing that a number of those sites would have been closed as part of the Optimise program and would have been quite expensive to close as part of the Optimise program. So much more attractive economics. Your second question was around what savings we could expect from Optimise. We've tried to be unusually helpful actually. And on Slide 26, in the appendix is some more details on the Optimise. I think that gives you the numbers you probably want there, but let me just voice over the ones. So for this year, we're saying we expect GBP 4 million to GBP 5 million of Optimise profit benefit, the next year, we're saying we expect around GBP 10 million Optimise benefit. And then that full run rate of at least GBP 15 million achieved by the middle of 2027. You can also see there what we've tried to lay out how we expect the cash cost and the P&L cost to be phased. And the cash cost this year, just worth just unpicking that broadly neutral cash cost comment, GBP 7 million of cash costs in the first half in the cash flow statement. We're saying broadly neutral for the full year. Remember, you will see that split between 2 line items of the cash flow for the accounting nerds, which is you'll see the restructuring cost, and you'll see an M&A disposal proceeds. When we talk about broadly neutral, we're talking about the net of those 2 because that is the economics of the Optimise program but don't put 0 in your restructuring line for your cash flow or you'll have the wrong numbers. Hopefully, that's clear.