IG Design Group plc (IGR) Earnings Call Transcript

Good afternoon, everybody. Thank you very much for joining us today. First of all, we'll give you a summary of our FY 2020 results. That's year ending the 31st of March. We'll give you a summary of our COVID-19-related actions, response and current status. We'll update you on the acquisition that we completed on the 3rd of March of CSS Industries in the United States. We'll also give you an overview of our quarter 1 trading in FY '21 and the outlook for the full year and beyond. First of all, just a summary of our overall business. What did our revenue profile of FY '20 look like? And what are the trends for the future? Well, as you can see, just under 60% of our revenues actually were in the United States. And what we see going forward is that, that number will be closer to 70%. That's partly because of the organic growth that we have in the United States and, of course, as an effect of the acquisition and consolidation with our core business of CSS Industries. Outside of the United States, what we are seeing is a trend for a number of our customers, developing product and buying product across borders. So quite a lot of pan-European collaboration. That's also the case with our licensors. So we see that trend continuing. And in the future, I feel we should look at our business as the Americas, United States, Canada and Latin America and the Rest of the World. As far as seasons are concerned and particularly since the acquisition of CSS, we will see that the Christmas season is a less dominant aspect of our business. Still a very important one, but we see that our Christmas sales will now be below the 50% barrier, perhaps moving to the low 40% over the next couple of years. In terms of product categories, the Celebrations category, particularly including consumer gift packaging, is our largest single segment of business. And that still has growth. But we see the key growth areas being in all other categories. In particular, recent strides have been made in what we call creative play, in fashion, stationery and, of course, in the craft business in particular. And finally, in terms of the split between the products that we source and the products that we manufacture. Manufacturing, which has been significantly boosted with our recent investment in a state-of-the-art printing press in Memphis, Tennessee. We see that manufacturing will now veer towards the 40% level of all the products that we sell. So a growing part of our capability. It will enable us to re-shore product, which is currently being sourced in Asia and make it in the United States and a good hedge against tariffs for the future as well. So they are the overall trends that we've seen in the business. Now I'd like to talk in greater detail about COVID-19 and the response in our business. As is the case with everyone, of course, as we got towards the end of March, we had to ask ourselves how will COVID-19 impact our business? And whereas we had a detailed budget plan for business as normal, it was clearly not going to be business as normal. So we focused on 3 areas: our people and operations, customers and suppliers and our financial position. Naturally, we rapidly move to ensure that we adopted all protocols across our, particularly manufacturing and distribution sites and, of course, all of our offices. And we found ourselves by the end of April having a pretty favorable position, certainly compared to that which was very uncertain to us as we entered into lockdown. Our U.S. business had achieved the designation of being classed as an essential business. That was very important to us as we could remain open in our manufacturing and distribution centers. Now why were we designated as an essential business? First of all, many of our customers were essential retailers, Walmart and Target and Costco and Aldi, et cetera. Secondly, a number of our product categories were in significant demand, so home educational product, kids crafting product. We were also a supplier of componentry for PPE. So with our facilities having really established absolute best practice from a health and safety and social distancing and all of the regulations that we had to comply with, we achieved essential business status. In Wales, we were designated as a best practice site where local authorities and the fire brigade used our manufacturing and distribution facilities, as an example, to other local businesses of how to adopt best practice. So hopefully, you as investors find that reassuring. And we're certainly proud of that fact. By the end of June, all of our facilities were fully operational. The last one to become open was a facility which was part of the CSS portfolio in Mexico. But I have to say that having gone into the first quarter really fairly uncertain as to what lockdown would mean to us in terms of revenue and in terms of manufacturing, our ability to operate, the outcome has been far better than we expected. So we are both pleased and relieved about that. From a customer and supplier perspective, one of our first objectives was to try and lock in our important Christmas order book for the year. Now normally, by the end of April, we would expect our Christmas order book to be at around 60% to 65% of the year. But I'm very pleased to report that it exceeded 90% this year. And part of that was because we engaged with our key customers. And we all knew that it would be more challenging this year to organize and plan for the Christmas period. But as a test of our relationships and really mutual dependency, I'm pleased to say that we secured very early on, firm orders for Christmas from our major customers. And you may have seen in our announcement that our order book is now in excess of $500 million. So roughly now, 95% of our Christmas order book is firm and locked. And this is mainly with our largest customers around the world. Indeed, we've already started to ship many customers wanting us to give them absolute certainty of supply for the coming Christmas season. So we were very happy with that. And as we were able to plan in terms of our manufacturing for Christmas, similarly, we could do so where we were outsourcing. So to also help the situation, I'm pleased to say that our suppliers have actually executed in an exemplary manner so far this year. But we help them to do that and our customers help us to do that. So good news. As Giles will explain shortly the details of our financial position, clearly we wish to manage working capital in a robust manner. That is the norm for us but we really focused on cash. And I'm very pleased to say that we remain cash positive for the entire quarter 1 period. So we were very pleased with that. To summarize, therefore, particularly in quarter 1 and as far as COVID is concerned, our key objectives in terms of maximizing performance, securing the order book and being operational as much as possible has been achieved and we are very pleased with that. So if I can hand over now to Giles, who can give you a financial overview.

As a starting point, it's worth just highlighting the -- because I've come to this point a number of times. It's worth just highlighting that we weren't immune to the impact of COVID in the financial year. And effectively, there were 2 situations that impacted us. One was in relation to orders that had been taken by us. We were unable to either ship or unable to deliver to our customers because our operations and our customers went into lockdown. And the second was that our manufacturing facilities were closed. And as a result of that, we were unable to produce and that impacted our ability to absorb overhead into inventory and, therefore, left costs in the income statement. So those 2 impacts together added to about GBP 3.8 million worth of profit impact. We haven't booked those. They aren't part of our reported numbers. But it's useful to understand that background when we talk about the numbers because I'll refer to it a few times. So in terms of our first financial highlights, really, we focus on the shareholder commitments that we make, and we refer to these every time we report. Those break into 3, which is adjusted EPS, dividends and average leverage. In relation to adjusted EPS, you can see it stepped back slightly year-on-year. But when you adjust or reflect, I should say, the impact of COVID, you can see, therefore, that we came in above last year and also in line with market expectations. Our dividend at 8.75p -- full year dividend at 8.75p marginally ahead of the prior year, continuing our policy of a progressive dividend, reducing from 3.4x to 3.1x dividend cover. It's worth mentioning at this point, and echoes Paul's point from earlier in relation to our forecasting and our confidence in our forecast, that we have only declared this dividend with the background being that we have high levels of confidence in our business going forward in terms of our control of cash headroom with our banking facilities, and I'll cover those more later, but definitely a testament to the response of the business to COVID and how it's ensured that it's able to not only continue to deliver a good performance year-on-year from a profit perspective but also a very strong cash performance. In terms of average leverage, we saw leverage drop from 1.3x to 0.9x, really reflecting 2 factors. One is the ongoing focus that we have in the business on cash management throughout the year, but also the fact that we -- when we did the CSS equity raise, we raised an incremental amount. And that's obviously helped in those latter months. So if we shift on to the next slide, we get a little bit more deeper into the financial performance. So you can see here revenues. Our target was to get to GBP 0.5 billion and we were just shy of that. And we would have been just above that had it not been for COVID hitting in those final few weeks of March. Similarly, if you look at the adjusted profit, slightly step back in the year, but again, adjusting for that GBP 3.8 million I discussed earlier would have been ahead as expected. Finally, net cash at GBP 42.3 million. Fantastic performance to end the year on, but also a fantastic situation to find ourselves in going into the COVID crisis. A little bit more color in relation to the P&L. From a revenue perspective, we've delivered 10% overall growth. And that 10% growth was 7% organic growth and the balance being the contribution of CSS in that final period from acquisition. In terms of the growth at the organic level, the U.S. and Europe very much remain the key drivers of that, with the U.K. and Australia stepping back slightly, really reflecting, certainly within the U.K., a very challenging retail environment. Within Australia, decisions that we talk around whether to renew contracts with certain customers, which we chose not to. In relation to adjusted operating profits and more particularly the margins there, you can see that margins were at 6.5% prior to any impact for COVID. If we adjust for those, we'd actually see our margins year-on-year, very similar. A couple of other points to bring out within the income statement. I'm not going to go through all of them. Probably the one that's worth picking out is the adjusting items. And there's 2 factors here to bring out. One is the actual quantum of the adjusting items in the year at GBP 28.8 million. But also I'm going to talk about an adjusting item relating to tax, which is should hopefully be interesting for one on tax. If we go back to the GBP 28.8 million, clearly, a significant increase in adjusting items year-on-year. And we can break that into really into 2 parts. One part is COVID and the impact of COVID. I'll talk about that in a second. And the second is really a reflection on the strategic agenda that we have been -- we have had over the last 24 months and specifically focused on M&A. And I'll come back to that and explain that more in a minute. So back to that COVID. So we talk about GBP 10 million worth of additional provisions in the year in relation to COVID. And those splits broadly inventory, GBP 6 million and the balance being receivables. So why did we do that? So when you -- when we got to the end of March, we clearly had a situation where we could see that our expected revenues were going to be lower. Because of COVID, we're going to be lower than we had anticipated and lower than the ongoing run rate of the business in terms of sales. As a result, we need to take a view of whether there's an inventory exposure there. And to be prudent and to be cautious, we have taken that view. And we have increased our provisions in relation to our inventory. At the same time, we also took a view as to the collectibility of our receivables. And in doing that, we have taken an assessment that there is now an increased risk that certain of our customers, there is a risk that they may not pay us. Now the good news is we haven't had that situation arise yet. But we still feel it's appropriate to be cautious in our approach. And therefore, we remain -- we still have an increased receivables provision. So 2 factors: receivables and provisions on inventory driving a COVID adjusting item. So the second key driver of the adjusting items was the M&A activity and that strategic agenda I referred to earlier. So over the last 24 months, we've done 2 significant deals for the group. One, as you'll remember, was impact, which we did in August 2018. And the second was the acquisition of CSS, which obviously we announced in January and completed on March 3 this year. In terms of CSS, we have transaction costs, all the due diligence, all the legal work, et cetera, et cetera, that gets done as part of the transaction. We also have the first phase of the severance costs that are associated with the rationalization process that we're going through within that business to realize the synergies that we've identified. Those 2 together add to more than GBP 5 million in the year of those adjusting items. In addition, though, we also had the ongoing restructuring costs associated with the combination of our impact business, the impact business and our legacy Design Group business. And for those who will remember, in 2019, the calendar year, was a year when we undertook the consolidation of our Midway operation, which was our legacy Design Group operation -- manufacturing operations and our Memphis operation, which was the manufacturing facility for Impact. We consolidated those into Memphis. And for the first time in 2019, that integration ran through the peak period. Associated with that, there was also the investment and the delivery and the commissioning of the new printing press which was -- is now fully operational in Memphis. When you do a project of that size and scale, you have costs associated with that. You have onetime costs and those are the costs that are reflected primarily in the adjusting items as well in relation to the impact integration. So put all that together and you start to see the reasons behind the size and scale of the adjusting items. But also the fact that we're now in a position where, although we will have additional integration costs associated with CSS, we've gone through a big cost impact of those in terms of impact and CSS. And therefore, in FY '21, we're not anticipating a similar level of cost coming through. There will be some but it won't be at the same quantum or scale. I thought I'd talk about tax for a second. And this is -- if there's anything that is sort of a bright moment -- I can't say good but it's a bright moment in relation to COVID, it was shortly after acquiring CSS. And for those who may remember, when we acquired CSS, we did talk about how they had quite significant brought forward losses in association with losses they've made in prior years and that we were going to inherit those losses. We didn't pay for them. We certainly weren't willing to put a value on them at the time when we acquired the business. But having acquired the business and soon after COVID kicked off, the government in the U.S. changed their rules and extended the look back period in relation to those operating losses. And we've been able to, therefore, put a claim into the IRS for -- to the sum of $17 million, which we expect to receive in the second half. So if only from a nice sort of immediate return in relation to the investment that we made in CSS, that was a nice upside to see. Moving on to cash flow. You will see that on the slide that we've put an abbreviated cash flow in there that shows that reconciles to about GBP 25 million improvement in net cash in the year. And I've pulled out some of the key aspects of that, which I thought would be of interest. The first is in relation to working capital. You can see there's an interesting flip from an inflow last year to an outflow this year. But when you dig behind that and you strip out the impact of the acquisitions of Impact in 2019 and CSS in 2020, you can see that the actual underlying movements are broadly similar and really reflect the growth that we've been seeing in the organization. Plus a little bit of the move towards more manufacturing, particularly following that investment in printing in the U.S., where we're now having to buy raw materials rather than just putting in orders with third-party suppliers in other countries. So that really has a working capital impact. Those factors are helping describe those movements. Other big aspects of the cash flow in the year was in terms of CapEx. You can see again, quite a big swing in terms of net CapEx after disposal proceeds. 2 factors there to bring into that. One is year-on-year, we did spend more on CapEx in the year and primarily reflecting that investment in the U.S. printing press. But also, last year benefited from the sale of our freehold property in Midway in Georgia, which was the property which housed the operation which we have now consolidated into Memphis. That brought us some proceeds last year that bring that net number down in terms of total capital spend post proceeds. And then finally, I've put a little bit of detail. It's a little bit small to read. But it's detail there in relation to the CSS acquisition, both the proceeds and also from the equity raise and also the actual acquisition costs as well. Important to note, I think that what we said in January, when we announced the deal, is pretty much exactly where we ended up in terms of what we spent for the business when we bought it in March. So reassuring that, that there was no significant changes between that time. Finally, in terms of our banking and facilities we had, as we talked about them earlier, summary level, we have over GBP 200 million worth of banking facilities. That's an increased amount from what we had in the prior year. And part of the reason for that was, at the time we did the acquisition of CSS, we increased the level of facility that we needed to reflect the fact that there was an element of working capital build within the CSS business as well as within our business as well. As it's turned out with COVID and the plans that we have developed, we're actually going to see our working capital peak at a similar level to the prior year. That's sort of GBP 100 million to GBP 110 million. Put that in the context of about GBP 200 million banking facility, you can see we've got significant headroom in relation to the banking facilities themselves. And more importantly, in relation to the covenants that operate within the banking facility, we also have significant headroom there. So we're in good shape in relation to the financial health of the business, even having to deal with COVID. And on that, I will hand you back to Paul.

Thank you, Giles. A summary really of our strategy, our go-forward strategy and the 3 key strategic pillars that we have. And I guess I would say that if these were important to us pre-COVID-19, that they are even more so going forward. Working with the winners, if we consider the retailers where we have said we want to deploy our resources in growing our business with those retailers or those channels, we believe that those choices are just as relevant today, if not more so. The major grocers have actually been the lockdown winners, the major e-tailers, the Amazons of the world have found themselves in a position that not only in the short term, have they boost their revenues, but their prospects for the longer-term have been enhanced. And it's not a coincidence that our top 10 customers in 2020 were overwhelmingly in the grocery sector, were mass discounters or e-commerce players. It's not just us who wants to work with the winners, but our customers want to work with the winners as well. They are continuing to consolidate their supply base. And we find ourselves in a position where our so-called shopping list of products and services that our customers are seeking, that shopping list is increasing from our perspective. And we are doing more business as our customers grow, as they take market share and offer us a broader portfolio of opportunities. We've also found, particularly in the last 3 months that certain categories have performed exceptionally well. Now just to give a balanced feedback, others really haven't. There weren't a lot of people going out in April and May, buying gift wrap. I can assure you. But when it came to home crafting products, home educational products, creative play, jigsaw puzzles and kids crafts, huge demand, absolutely huge demand. Now that's good news. It also brings its challenges. But we have found that we've also grown -- every season, we've grown our Christmas business, we've grown our Minor Seasons business and we've grown our everyday business. Working with the winning customers, working with the winning channels, working with the winning product categories is a sensible and proven strategy. Our customers see us as a reservoir of design and innovation competence. Last year, we sold over 1 billion units of product for the very first time. And if you put 2 and 2 together, if you look at our sales, what does that mean? It means that the average selling price for us to sell to our customers is 50p. That means that the average retail price is between GBP 1.50 and GBP 2. This is a very resilient part of the market. And clearly, nearly all of our markets are in recessionary times, indeed, perhaps, in times of economic depression. Our customer base tends to be the most resilient and our product categories and values are also the most resilient. So we feel that we are in a good place. I've often described our design studios as the engine room of our business. We are employing just under 300 designers. They're our employees who are based in our regional studios around the world. That expertise and knowledge is really critical and certainly valued by our customers. We created and sold over 75,000 products last year. In terms of efficiency and scale, as Giles highlighted, we have invested on an ongoing basis and we'll continue to do so to ensure that we are at the sort of state-of-the-art level in terms of the products that we manufacture to reduce costs, to ensure that we are deploying everything which is viable to do so in terms of promoting sustainability and efficiency. And we're not just doing that through our organic agenda but clearly through M&A. And we bought 2 large businesses in the last couple of years and none more so than CSS. So perhaps a good time now to talk about how is the integration going. Well, true to say that when we are completed on the 3rd of March, as we all know, we hadn't envisaged us being in the situation that we are today. Nevertheless, our plans were pretty robust and very much in place. From the point of view of me and Giles, we just had to play our part remotely and virtually. We very quickly appointed a senior leadership team over the entire U.S. business, which included the Chief Operating Officer of CSS and included the Chief Human Resources Officer of CSS, 2 of our key appointments. This was very much an inclusive process. And one of the reasons we acquired the business is that CSS's management talent and its experience in certain parts of the business was superior to ours. And this was very much a 2-way street and a learning process. So one senior management team pulled together very quickly. And we asked the legacy Design Group CEO, Gideon Schlessinger, to focus his efforts on the commercial aspects of the business. John Dammermann, who is the former owner of Impact Innovations, who we acquired in the autumn of 2018 became the Americas Executive Chairman. One team, one culture. We also recognize that in a busy and growing organic business, it was very important to supplement and support our team by bringing in some external resource. We brought in a project management office to help us keep the scoreboard to ensure that we remain very much on track to deliver on the many initiatives that we had identified and they worked out very well. This is not without its cost but they are great value for money. In terms of the synergies that we had advised were deliverable, as a reminder, we said $6 million in year 1, with a run rate being $10 million in year 2 and $13.5 million in year 3. We have already delivered $5 million of that $6 million. We are ahead of schedule. We feel very confident and very comfortable about those numbers. There are currently undoubtedly thought to be incremental opportunities primarily, I would say, in the purchasing side, where we knew that there would be some opportunities. But they've been greater than we had envisaged. They will start to come through next year because a lot of those commitments were already made for this year. And in terms of cross-sell, we normally take the view that, that will take a couple of years for a cycle to come around. But actually, we're seeing some green shoots appear very quickly. And CSS offered us customers and channels that we weren't engaged in, particularly in e-commerce. Particularly, they had a really interesting business in the florist area, which we felt we could develop into a very good channel for our gifting product. So whilst the gestation period was long and the due diligence very thorough, truth is you really only get to know a business once you own it. And we've looked deep under the bonnet and there have been no nasty surprises. And if any, there've been some good ones. So in a strange way, I guess, COVID also makes you very action orientated. And we have been able to rationalize sites. The team has been very, very focused, very galvanized into making things happen. And we are very happy with the outcome of CSS. I guess we got a bit lucky in quarter 1 because, of course, CSS specialized in craft. And craft has been in very strong demand. And it's very much a reason why quarter 1 has been so much better than we had feared that it could be. So let's talk about quarter 1 and the outlook for the year. So from a revenue perspective, as I say, certain categories have been in very strong demand. In fact, it can be 800% ahead of normal demand. And clearly, that will normalize. Now that's good news, but it brings its challenges in terms of managing inventory. But that has also helped those categories which kind of hit a brick wall during the first quarter. We nevertheless, again, for an objective overview, like-for-like revenues compared to quarter 1 for last year are overall down approximately 20%. Design Group -- legacy Design Group categories are down 27%, whereas with CSS, they're down 11%. However, that's significantly better than we thought may be the case. And whilst those revenues are, in aggregate, down approximately 20%, from a profit perspective, were level. We are delighted with that outcome. So why is that the case? It's primarily because we have controlled costs extremely well. And the margin mix through the high margin, particularly craft category and creative play product category has been excellent. We're very, very pleased with that as an outcome. Clearly, our customers in grocery and in e-commerce have boomed during the first quarter. And I'm sure you've seen double-digit growth from Walmart. I think 8% plus from Tesco and Amazon were up 40% during that period. And we were the beneficiaries of that, too. So whilst sadly, we've had perhaps 1/3 of our customers mostly in lockdown through quarter 1, we have been able to compensate for that by working with the winners. And that bodes well for the future. I'm also very pleased to say that from a cash perspective, which Giles covered before, we remained cash positive for the entire quarter 1. We were delighted with that. Operationally, we had 3 key objectives: Number one, deliver the synergies that we had targeted for CSS. We've certainly done that and then some. Number two, remain open in as many sites as possible. And as explained, we were able to do that certainly from April onwards and impose all the protocols that are unnecessary. And finally, whilst the new printing press in United States was installed in March, the proof of the puddings in the eating. And by the end of quarter 1, we are very satisfied with the outcome in terms of production and efficiency and cost of production from that press. So having, from a commercial point of view, set our objective to close our Christmas order book as far as possible we were very, very pleased that our order book was concluded in excess of $500 million, probably a little closer to $600 million as we stand today. But that helped us plan ahead, as I mentioned earlier. So with quarter 1 better than expected with a strong order book, which we're already shipping and the execution risk of that now dwindling, really, for the year, the most critical sector of the year will become quarter 4, January to March next year, which is important to us and particularly important from a CSS point of view, it's a time of new range launches and of strong demand for kraft products. So that probably is the area of risk, a known risk, let's say, in terms of what demand will shape up as being. But of course, we overlay over all of that the risk that every business and we all have or what if there's a very prolonged and very pronounced second wave of COVID. But overall, if Giles and I would have been asked at the end of March -- well, if that's your position at the end of July, being what it is today, we would absolutely have taken it. And we're encouraged as to what the prospects are for next year. So to summarize, as Giles said, reflecting the impact of COVID-19 in the last couple of weeks of March, we were on track to meet market expectations, which we are pleased with. The strategy working with the winners, the winning customers, the winning categories, the winning suppliers also is very much in good shape. I would say that in terms of the overall marketplace, we are stronger than ever before in very good shape there. From a CSS acquisition perspective, definitely, so far, so good. In fact, the prospects seem to be that we can outpace, in terms of time and value, the synergies that we believe were available to us. Quarter 1 gives us confidence. But again, just to give some balance, it is down in terms of revenues year-on-year. But from a profit perspective, we're level and we're very happy with that. From an M&A perspective, we've been asked a lot about that in the last week. What I would say is we bought a big business in the United States in March, we haven't bought a business for 18 months and we concluded the CSS acquisition. I must say that we are deluged by M&A proposals coming our way. I call them proposals rather than opportunities. Most of them we would actually consider to be something that we can achieve with a little bit of patience organically. We would probably be more inclined to look at opportunities outside of America. But never say never, it depends on the strength of the management teams and just the overall situation. But it's not a coincidence. I think that a lot of smaller businesses are struggling. And we're seeing a lot of opportunity. And perhaps, we are seen as an industry consolidator. The full year revenues will be down compared to pre COVID-19 expectations. I think the marketplace consensus was that our revenues would be around the GBP 800 million level pre-COVID-19. And now the forecast, I think -- again, consensus is between, I think, GBP 620 million and GBP 640 million. And I understand why that is the case and we could outpace it. But I think much will depend on quarter 4. So that's a summary. I hope you found that informative and insightful. And I'm sure Giles and I will very much welcome your questions now. Thank you.

We have a question from John Bailey, who asks, how do your prices and gross margins on your 2020 Xmas order book compare with 2019 achieved?

I think they're overall pretty neutral to maybe slightly ahead. And we were asked a question whether that early commitment had been at the sacrifice of margin, it hasn't been. There's been virtually 0 discussion in terms of, well, we're doing you a favor, let's do us a favor. I just think, as I said, there's been mutual dependency. We will see certain elements of margin improved because whereas last year, we didn't have the full ability to respond to the evolving increasing levels of tariffs, this year, we knew that the tariff situation existed. So those negotiations and all of the initiatives that we could take to engineer a product to create efficiency in manufacturing, we could take into account this year. So overall, they haven't gone backwards. And they may be slightly ahead.

And we have a verbal question from [ Anthony Lawrenson ].

Paul, can you just give us a flavor of how the supply chain is operating for the non-manufactured side of the business, particularly coming out of Asia and China in particular.

Well, there's someone who knows his onions. For other listeners, Anthony was Giles' predecessor. Actually, very well, Anthony. And I think, as you know, a lot of this is about their ability to prepare them because -- particularly for the Christmas season because we could provide very early detail, not just the numbers, but all of the components that you need in order to go into manufacture. We've actually found that the execution and compliance with expected schedules has been exemplary. It's not only about the manufacturing production. It's also about pre-manufacturing sample approval process. And we were able to achieve that much earlier this year. We were pretty discerning in terms of who we wanted to place our business with. And we took a very low-risk approach. And all I can say is so far, so good. As you know, if you get trouble, it tends to be at the worst possible time, at peak season. But I think we've already -- from a supply point of view, we've got to that point of peak season. And if I was wearing a hat, I'd take it off to our suppliers to say thank you very much because they've performed very well.

And we'll now go to [ Damian Canon ].