Ladies and gentlemen, welcome to the Ferguson Full Year Results Call to 2020. My name is Adam and I'll be the operator for the call today. [Operator Instructions] I have the pleasure of handing the call over to Mr. Kevin Murphy, the Group Chief Executive of Ferguson. If you could like to go ahead, please Kevin..

First, to safeguard the well-being of our associates and our customers, we immediately moved to operating our business in adherence with CDC guidelines. Cleaning protocols at all sites were put into operation alongside social distancing measures. In the early weeks of the pandemic, we decided to act immediately to protect our associates and customers.

And we moved our branches to pick up and delivery only with customers encouraged to order ahead and to pick up in-store at the curbside. Our showrooms also moved to virtual appointments only. We provide a critical function in the supply of essential products and services.

In March, we took immediate steps to ensure our services were authorized as essential. Our associates continued to serve end-customers, including supermarkets, hospitals, schools, utilities, food producers, and other manufacturers. Ferguson has an agile business model.

Our key priority at the start of the pandemic was to ensure we maintained our strong liquidity position even in the most pessimistic of downside trading scenarios. At the same time, it was important to preserve the ongoing cash flow of the business, and we therefore identified significant cost and cash savings.

These measures, some of which were temporary, have enabled us to remain highly cash generative in the second half of the year. We also continued to stay disciplined on working capital, which remains a key strength of the business. As local lockdown restrictions were lifted, we reopened all of our customer facing locations.

This is included allowing customers to transact inside our trade counters in specified locations with additional protective measures in place, re-opening our showroom network with enhanced social distancing requirements, new signage, reconfigured workspaces, and altered schedules to encourage social distancing, health assessments and temporary checks in hotspot locations, in particular across our supply chain network, maintaining hygiene and sanitation protocols at all sites, including disinfecting customer high touch surface areas regularly.

Overall, in the U.S., we've seen fairly sequential recovery in revenue since April, and we returned to organic growth in Q1. Residential markets have remained fairly resilient with good single family activity levels.

Commercial markets have weakened overall, most notably in areas like retail, office, and hospitality though this has been partially offset by strong activity in distribution and data centers. Civil markets were resilient in initial lockdown as customer work sites are typically both large and outside.

Industrial markets have remained challenging through the year, due in-part to depressed oil prices and overall tough operating environments for manufacturing during the pandemic. We grew faster than the markets we serve in 2020 and continue to gain share in each sector with our outperformance estimated about 3%.

You can see that our markets sharply contracted in the second half. Since late spring, we've seen a good recovery overall as lockdown measures started to ease. We think our markets today have recovered to about flat with residential leading the recovery.

New residential is strongest though RMI, where the majority of our revenue is generated, is also growing well. Non-residential markets remain much more challenging with commercial markets down about mid-single digits, and civil is a bit weaker still.

We track data points from numerous economic industry and research sources, as well as surveying our own customers and measuring our order books. Looking at this data and applying it to our business mix, our best view of markets in 2021 is flat overall. While we've made a positive start to the year in the U.S.

from a revenue standpoint, we're still pretty cautious on the outlook for this year. Naturally, there's a great deal of uncertainty out there at the moment not least caused by the pandemic and the trajectory of the U.S. economy from here.

Looking forward, the strength of our business model and balance sheet positions the group well in these more uncertain markets.

Assuming there's no significant COVID-19 second wave, leading to major market shutdowns, we expect to make good progress this year, continuing to strengthen our market position and we're looking to the medium-term with confidence. Let me pass you over to Mike who’s going to take you through the numbers.

Mike?.

Thanks, Kevin. And good morning, good afternoon to everybody. I'm pleased to present the group's full year results, which clearly show we had a good finish to our financial year.

Just before we get into them, it's worth reminding ourselves that the ongoing operations that I refer to throughout includes the U.S., Canada, and Group costs whilst the UK operating business is within non-ongoing operations. [I will also] refer in the main to numbers excluding IFRS 16, just to aid understanding.

Ongoing revenues in the year were up 2%, and we held gross margins reflecting the value we deliver to our customers, alongside which we tightly managed our cost base, which altogether means trading profit, growth continues to outpace revenue growth.

Ongoing online trading profit of nearly 1.6 billion was up 63 million with trading margins progressing 20 basis points to 8%. Headline EPS declined 1.1%, principally due to the higher effective tax rate from previously advised tax reform.

And taking into account the Group's prospects and financial position we’re pleased to propose a final dividend of [$2.082] in-line with last year and this effectively reinstates the previously withdrawn interim dividend, and reflects our confidence in the business going forward.

As you'll also see later, cash generation has again been excellent this year, and the balance sheet remains very strong with leverage of [0.6x].

So moving to revenue and trading profit growth, I've expanded on this chart, the revenue growth of 2% and the profit growth of 4.1% for the Group that I have just talked about, and I have broken it down into its component parts.

Organically, you can see the profit growth of 2% exceeded the flattish revenue, and this is the part of the results that I'm really most pleased about, as we made quick decisions, and have clearly demonstrated the agility of the business model.

The significant acquisition contribution we've delivered reflects the effort put in by the teams to bring these businesses into the Ferguson family. As always, we've integrated those businesses rapidly so that we can deliver value to the customers and also extract the synergies.

Moving on to the business results, first and most importantly our largest region the USA, which represents 97% of ongoing trading profit; and this clearly delivered a strong performance and continued to outgrow the wider market. We've got good momentum at the end of the first half as we told you back in March going into the second half.

And then of course COVID-19 lockdowns started to impact our markets. Since March, the lowest revenue month was April, that was down approximately 9%. And revenue has steadily recovered since then, and we're now back to generating growth year-on-year, growth rates across the U.S.

continue to be heavily dependent on local infection rates, and state by state lockdown controls. Gross margins were well controlled, and as you know, we use this as a gauge of the value that we deliver to our customers.

Now, given the environment we faced, we took a number of prudent cost saving measures to match costs to volumes and to protect short-term profitability. And these included a hiring freeze, a reduction in associate hours, over time and temporary staff, along with temporary layoffs being implemented in the worst hit regions.

Due to those quick actions, decisive actions on costs, underlying trading profit, you can see came in at $1,587 million, approximately 80 million ahead of last year with trading margins increasing 20 bips to 8.4%.

Clearly a very pleasing performance and again, just reflects the agility of the business model and the ability of the management to flex the cost base in tougher market conditions, whilst also being able to grow where opportunities present themselves. On the next slide, you can see there was some small variations in revenue growth in the U.S.

across Blended Branches, which is our largest business, with the strongest performance in central, slight declines in the West. And during the pandemic, the Blended Branches revenue declines were strongly correlated, of course to local lockdowns. Though, as Kevin has said growth rates have recovered steadily since.

In Waterworks, we generated strong growth throughout with fewer operating restrictions because of course the majority of the work there is actually outside. And HVAC continued to grow well generating strong performance during the year and that has benefited from strong residential equipment sales through the summer months.

We have homeowners improving their houses, which has kept our trade customer busy, and we've also seen this trend in E-business, particularly in Build.com, which has generated strong double digit sales growth in recent months. Adoption and use of our mobile apps and e-commerce platforms has increased significantly during the pandemic.

And Kevin will touch more on this later in his presentation. Canada, representing 3% of ongoing trading profit that faced some pretty challenging markets, pre-COVID.

Revenues declined 7.5% overall for the year, that reflected the economic impact of some pretty tough national lockdowns and other challenging conditions in Western Canada with weaker industrial markets, and also some subdued residential markets.

Gross margin, slightly lower than last year, and despite cutting costs there trading profit came in at [CAD$58 million]. However, we are well placed to capitalize on growth opportunities in Canada as the markets recover, and we are starting to see early signs of that happening already.

So, now I've taken you through the performance of the ongoing business of the U.S. and Canada. Let me move on to the non-ongoing operations of the UK, where we saw revenues down approximately 14% in 2020. Again, pretty tough national lock downs in the UK. Revenues were down very sharply at the start of the pandemic to a low in April of minus 60%.

They have also steadily recovered and the business has now moved back to modest growth. Gross margins, a touch lower in the year. However, we have continued to work hard to restructure the UK business around a clear customer proposition and to drive efficiencies.

Towards the end of the year, we refocused the business by separating out building services from the core plumbing and heating business to better align our market proposition to our customer needs. We also closed the Worcester distribution center to reduce supply chain capacity and create operational efficiencies whilst improving customer service.

We also took no government furlough money during the year. Trading profit came in at [£6 million]. And the good news is that efficiency measures that I've just talked about are clearly coming through in the P&L as we start the new financial year.

So, moving on to exceptional, for which we charged 120 million in the year, which you can see on the left hand side of this slide. You can see the top two items on the left [that add up to] $93 million. Those are the restructuring of the USA, Canada, and UK businesses.

So after we stabilize these businesses with the short-term measures I described during March and April, we worked through in May what we wanted and believed we needed to do with our permanent labor cost structure.

To ensure productivity and an appropriate response to the new environment, we decided to roughly take out 5% of the headcount in the USA, and 10% in both Canada and the UK. We've gone through the correct processes with the respective workforces.

And this has concluded with net permanent headcount reduction in the USA of 1,400, 300 in Canada and 400 in the UK. Most of those heads actually left towards the end of Q4, and these actions ensure we will continue to drive efficiency into the new financial year and have the appropriate flexibility and skill set as we pass the business forward.

In the U.S., we also announced the closure of approximately 70 branches, about half of which were closed by the year-end, and the remaining will work through the system through the next year.

It's important to remember that a lot of these is actually where we will consolidate into better premises to improve the customer experience, and really to keep the math real simple for everybody, you can assume there's a payback of about a year on these restructuring costs.

Of course, not all the cash flowed in FY 2020, and I'd expect about $70 million of the cash to flow in FY 2021. Moving to the right hand side on tax and interest.

Firstly, interest costs pre-IFRS 16, they increased slightly due to the high level of average gross debt, compared to last year that we carried, and our expectation for interest in FY 2021 is approximately $85 million to $90 million, plus say about 50 of IFRS, taking the total for the year to 135 to 140 for FY 2021.

And on tax, the effective tax rates for the year totally in-line with guidance that we gave was 25% to 26%, [I don’t] expect that same tax rate for FY 2021.

I've set out the cash flows on the next slide on a pre-IFRS 16 basis, as I said to really just aid understanding, there's a full reconciliation to the statutory notes in the appendix, but again, very clear evidence of good cash generation, and the disciplines that we keep around cash, and these continue to be an important priority and a real quality of this business.

Cash flow from operations $1904 million, nearly 300 million ahead of last year. We saw working capital in-flow, principally from lower receivables, and we remain very well invested in inventory for our customers.

As ever, spot cash flows on working capital, always a little misleading, and I’d anticipate about $100 million at the strong working capital performance to unwind in quarter one.

Capital investment that was at the lower end of guidance that I gave last year, I'd expect for FY 2021 this to be somewhere between $300 million and $350 million, but clearly, we can flex that, depending on the environment that presents itself.

Dividends paid slightly lower due to the withdrawal of that interim 2020 dividend, but as I've said, we now propose to pay the [$2.082] per share that’s flat for last year, and that cash flow will clearly flow past the balance sheet date.

We also invested $351 million in acquisitions, largest of which was Columbia Pipe & Supply in the Midwest, and we have a normal pipeline of bolt-on M&A opportunities that we are currently considering.

So, the profit and cash delivery clearly leaves us with a strong balance sheet at 0.6x net debt to EBITDA, that's below our targeted range of one-to-two times. I've shown the IFRS 16 lease liabilities on the slide. So you can also see the IFRS 16 inclusive ratios.

The pension net asset has become a net liability, as in line with a lot of other companies, a combination of people living longer, and falling corporate bond yields means that the liability has increased, but clearly still remains in reasonable shape. On our capital allocation and capital policy, there is no change.

As I think forward to the half year, we will have paid the final dividend of about $470 million. The reversal of the spot working capital as I mentioned earlier of about 100 million likely to flow out. We have the normal working capital cycle increase through to the half year and a little bit of M&A is looking likely.

And of course, we have the trading cash that we generate. If you put all that together, I would expect this to be a touch under the lower end of the leverage target at the half year by the time Bill comes and talks to you next. We do not propose to start the balance of the buyback at this point.

We will revisit that when there is a little more visibility in the business environment of keeping the balance sheet super strong for a little while longer in the current environment seems sensible. So, let me wrap up. We're pleased with the 2020 results that the team's delivered in quite exceptional circumstances.

Strong operating results with continued market share gains, and excellent cash generation, all of which prove the agile business model, and leave us with a strong balance sheet, which puts us in a great position going into financial year 2021. It's great. I can hand over to Bill. I've worked alongside Bill now for the last 3.5 years.

He and Kevin will be great together. And I am sure we’ll continue to drive service and forward with your continued support. Kevin, back to you..

Thank you very much Mike. Much appreciated. Let's move on to strategy. Our strategy is consistent with the direction of travel in recent years. We will constantly evolve our approach over time and our strategic framework is our roadmap for developing our business.

Overall, we want to ensure that we drive initiatives to improve our relationship with our customers, our suppliers, and most importantly, our associates. We will operate with a short-term and long-term focus not sacrificing the short for the long or the long for the short; we can and will do both.

We will continue to focus on driving all our resources and knowledge to make our customers projects better because they dealt with our company. This is the essence of Ferguson and we will provide the best service in our industry based on our foundation of attracting, developing, and retaining the best associates.

We’ll be our customers trusted supplier, giving them unrivaled choice of product sourcing the leading brands in all our categories, including our growing portfolio of high quality own brands. We will drive scale in our business.

So, we can make our customers more successful by ensuring they have access to products and advice where and when they need, offering a true omnichannel experience. So, doing business with us is as frictionless as possible.

We'll use technology to make our business more productive, and equip our associates with tools to drive efficiency, while saving time for the customer. All the while, never being afraid to experiment or to innovate. As we proceed this morning, I'll hopefully give you a sense of some of the areas we're driving as we continue to execute this strategy.

We see ourselves as partners to our customers to make their projects more successful. Distribution remains a core competency, and we bring the deepest and widest inventory in our product categories with a world-class supply chain. To our customers, this means putting together a bundle of products and getting it to them when and where they need it.

That is our core. We have to be more than that. We'll make sure that through a consultative approach with our associates, we're guiding a customer's project to make sure that it's more successful because they did business with us. Personal relationships are critical. We also believe this is not enough.

We need to build the capabilities that drive the best digitally enabled customer relationships. It's clear from COVID-19; technology must support our customers to make them and us more productive. We will focus on driving the Ferguson brand to ensure customers recognize and value what we do as a consultative experience.

We’ll drive a focused product strategy that includes both branded and own brand offerings. We will be part of a customer's decision making process evolving from order taker to trusted advisor. Other important areas of focus are value added services inside our supply chain and the evolution of what our Salesforce should and will be.

We'll continue to be mindful and invest in innovation and disruption that's coming from outside of our organization that's addressing overall construction productivity. We see four dimensions to growth, which emanate from our core strengths. It all begins with the customer. And we will never abandon the trade professional as our core relationship.

But what we will do is address stakeholder relationships more than ever before. We'll make sure we're engaged with owners, engineers, architects to drive project specifications, and to ensure that we're uniquely positioned to secure a project. This will also serve to expand our overall gross margin profile.

Secondly, while we have no intention to own manufacturing assets, we're going to get as close to the point of manufacturing as we possibly can. We're going to continue to expand our diverse global sourcing organization to make sure that we're driving design, product development, and own brand execution. We'll source from inside and outside the U.S.

for own brand applications, and drive sales through specification to that end user. We’ll use product expansion to grow the bundle providing a comprehensive range of products, so that we're more relevant for not only the trade professional, but also the ultimate end user and owner.

Now, I know you've seen this chart many times before, but it's a great reminder of the opportunities we have in the U.S. and how we focus our teams on the very specific needs of these individual customer types. The chart shows our nine customer groups with our estimated market share in each bar.

The important area of the chart is the grey portion, which shows how fragmented our markets are and how large our market opportunity is. In terms of business expansion, we will stay focused on our customer groups. There's a significant opportunity for strong growth and continued consolidation within each of these large and very fragmented markets.

Many customer projects require a range of products and services from across the business. And we leverage our scale and expertise across the entirety of the organization. We benefit from significant synergies across our customer groups to help lower our costs and to improve our margins.

We've chosen operate in these markets because we can generate strong growth, attractive gross and net margins in good returns on capital. We first focus on organic expansion, and then select a bolt-on acquisition across all of our business groups.

We generate benefits of scale in areas like distribution and technology, strengthening customer relationships that are uniquely local. We're always focused on ensuring the best human relationship exist together with the best digital relationship. We’ve become a much more balanced business in the U.S.

We're more focused on repair and remodel today than at any time in our history. This makes us a much more resilient business going forward. As an example, our waterworks business pre-2008 was heavily focused on new single family residential construction work. There were 2.2 million new housing starts at the time.

But today, we have a much more balanced business. We compete in a number of areas in addition to new residential construction, including commercial, public works, municipal, water and wastewater treatment plant construction, meters and metering technology, and soil stabilization.

This type of diversification is represented in all our traditional business groups today. A differentiated service offering happens at multiple levels in the customer journey. Our people will work to offer error free takeoff services in the industry's best quotations, helping our customers to build their jobs.

From the sourcing standpoint, we will represent a balanced product strategy to ensure the best gross margin profile for products that are also the most appropriate for the customers design. We offer customized solutions to help customers in the construction process, saving them time and money.

We offer same day, next day delivery of the broadest and deepest range of products in the industry bolted together with technology solutions that will deliver true project management. Best way to illustrate this approach is a simple example. A specialty U.S. pharmaceutical company recently needed to enlarge its manufacturing operations.

Unfortunately, the roof of the manufacturing facility couldn't support the weight of traditional steel pipe or the air handling units that were needed for the job. The cost to reinforce the structure, as well as the operational disruption that it would cause was not an option for the owner.

Together with our customer, we work to create a prefabricated system of polypropylene pipe that could be evenly distributed, reducing the load to the existing roof structure without extensive reinforcing. The results save the end user significantly indirect costs, as well as the cost associated with any downtime that would have been required.

We supplied prefabricated kits with all the required components so it could be easily assembled on site, which also reduced construction hours, and it was completed with no recorded injuries. Today, the second phase of that contract is currently being fabricated and shipped.

We think of balanced growth strategy with same store sales growth, organic expansion, and bolt-on M&A. In March, as Mike said, we acquired Columbia Pipe & Supply, a market leader in commercial and PVF distribution in the Midwest.

The Chicago metropolitan area is the third most populous in the United States, and you can see from the slide, we've got a huge opportunity to build our commercial business in the region, with Columbia, adding about $220 million in revenue.

While we have 40 existing locations in the region, we were significantly underrepresented and commercial and Colombia is a great fit, building out our position in some attractive cities across the Midwest. Most importantly, we welcome 375 dedicated associates who’ve developed deep trusted relationships in the market over many years.

Going forward, we have a number of attractive traditional bolt-on acquisitions in the pipeline, several of which we expect to conclude later this year. But in addition to bolt-ons, we’ll also use acquisitions to grow capabilities that will make our branches and our digital channels more relevant.

Many of these opportunities allow us to get closer to the consumer and owner while adding to our own brand product offering. In 2018, we acquired Safe Step, which sells own brands, bathtubs, and showering systems for the limited mobility bathing market. Since the acquisition, we've grown revenue by over 30%.

The business has great returns with gross margins two times our core gross margins, and is solidly accretive to trading margins. Manufacturing is contracted out, but completed within the U.S. and the business has a direct sales model utilizing a network of over 100 independent sales reps.

Since we acquired this business, we've expanded our growth within our showroom network, our residential and commercial channels with great success. We must provide a seamless experience for our customers, no matter what order channel they choose to use.

Our associates will spend less time processing orders and more time guiding our customers, thus enhancing productivity, customer service, and most importantly relationships. We've added many pieces of functionality.

We've recently launched a real game changer for us, which is a great example of how technology can enhance our service while improving productivity. Offering geo location services for our customers means that we can empower them through the Ferguson app to receive real time notification of deliveries via voice, text or email alerts.

Customers are now getting notifications as the truck is making stops along the way, updating timing so they can better plan their day, but it's also tied to enabling them to understand precisely what is on that truck and what is about to be delivered.

If you can imagine, we have over 2,000 outside sales associates in nearly 4,000 working inside sales, who are receiving calls multiple times a day checking delivery times, and inventory. Freeing up these associates to spend more time on sales and consultation will be a significant productivity improvement.

We're incredibly excited about linking that geo positioning to the Ferguson mobile experience, which we think will drive rapid adoption by our customers unlocking so many additional capabilities through their mobile device. We're in the early innings of rolling out new releases.

So, if our customers want additional functionality like geo positioning, they can access it easily.

This gives them enhanced functionality on the go, including buy online pick-up in store, downloading proof of deliveries, searching the widest and deepest breath of product inventory in the industry, accessing rich product content, scheduling delivery, and installs much more.

Unsurprisingly, we've seen significant customer uptake in these tools during the pandemic. App activity has doubled since March. We've launched additional services to help customers operate in the COVID environment. For example, our [indiscernible] tool can be used at our counter so our trade pros can easily text orders for contactless pickup.

Our overall user activity is up almost 50% on our digital platform since March. Hopefully that gives you an idea of how we're executing our strategy. Now, onto a couple of corporate matters. The exit of the UK business remains an important priority.

The timing of this remains uncertain, and consequently, the board is assessing other separation options in parallel with the [demerger processor]. Our objective remains to exit the UK from the portfolio as a standalone business. We continue to make good progress on the transition of the business to a full U.S. primary listing.

Post the exit of the UK, the executive team will be entirely based in the U.S. and all the company's revenues will be generated in North America. We continue to believe that the U.S. is a natural long-term listing location for Ferguson.

In July, following shareholder consultation, the board sought shareholder approval for an additional listing of ordinary shares in the U.S. Shareholders voted in favor of the resolution and we received over 99% support. We expect this new listing to be effective in the first half of calendar 2021.

And in due course, we'll put forth a further resolution to Ferguson’s shareholders to relocate the primary listing to the U.S. In summary, [sat here today] our business is in good shape. We're extremely proud of how our associates have risen to the challenge.

We're pleased with the operational delivery given challenging markets, and we will continue to focus on execution. Most importantly, we will manage the business very carefully as the trajectory of our markets remain uncertain. Our business is diversified and resilient. And we have a clear strategic direction.

This includes investing in the strong foundation of a world-class supply chain, delivering a consultative approach to our customers and investing in technology. Thank you for your attention. Now, Mike, Bill, and I will be very happy to clarify anything that's unclear, and take any questions or comments you may have.

Adam, I'll hand the call back over to you..

Thank you, gentlemen. [Operator Instructions] We have our first question and it comes from Will Jones of Redburn Partners. Will, if you'd like to go ahead with your question, please. .

Thank you. I've got three, if I could please. The first was, that’s actually a two-part question just around the cost saving measures for the year ahead. [Indiscernible] just the – roughly 5% headcount cuts in the U.S. would still be compared with….

Will, we're having trouble hearing you. Could you could you speak up just a touch..

Yes. Is that better..

A bit, yes..

Yeah, sorry. I will. Sorry. I'll speak a little louder. Apologies. Yes. The first was just around the cost savings and checking that the 5% headcount cuts in the U.S.

is compatible with small revenue growth, which is what I guess you might see for the current year, would you have to kind of bring back on some of those heads if trends remained as they are? And linked to that as well, the branch closures, I think Mike's comments suggested that you would relocate, reconsolidate into better locations, can we assume from that you don't expect much of any revenue loss from the branch closures, but just to check that because [78] [ph] is a really big number? Second question was just around gross margins, perhaps just for the year, and as you could give us a feel for what you see [indiscernible] on the business, I guess things like make own label, cost to serve, just how it might shape up in totality? And actually the last one was just on strategy, just referring back to your slide a couple of early on in the presentation around the market shares and the market sizes.

I think HVAC is an interesting one, where you've got around a 4% share, it's one of your biggest total markets though in size, and possibly a COVID beneficiary. I just wondered if that is a market where you see good incremental opportunities.

I appreciate it's quite dependent on manufacturer relationships there, but is that one of your kind of verticals, you could push on maybe in the next couple of years? Thank you..

Perfect. Thank you, Will. We did have some trouble hearing you, but I think I got the gist of it. This is Kevin, and I'll maybe take the first crack at the three questions. And then Mike and Bill please fill in.

From a cost headcount versus growth, as Mike indicated, we feel like we took a much better approach to what cost control and disciplines look like versus 2008, 2009.

So, depending on the market, and it was very local, we approach this with a variety of different actions from furlough, layoff, hours reduction, temporary workforce, and then reduction in force, to position ourselves, yes, for what we were going through during lockdown, but much more importantly, for what was going to face us as we went into Q1 and beyond.

And so, we've already seen as markets have begun to recover, and certain markets have gotten better that costs continue to put back into the system. Obviously, through things like an increase in hours work, what over time looks like in that system.

The thing I'm most pleased with is the flexible nature of which we've been able to preserve the intellectual capital of this business to make sure that we can continue to outpace growth as markets are supportive, and that agility to make sure that we can address the cost base if markets are more challenging.

And from a branch closer perspective, indicated that many of these were small branches. Yes, small, very few associates in branch. And so from a revenue perspective, we expect to capture and retain 100% of the revenue of those locations as we utilize other locations in those specific market areas.

From a gross margin perspective, we look at a good balance to the year ahead. Last year, we saw a good growth in areas like Waterworks, which do have a lower gross margin, even though the operating margin is consistent with the rest of our business.

But again, focusing on own brand and an overall balanced product strategy that allows us to achieve the value or realize the value that we provide in the marketplace, we still believe that we can grow margins, roughly 10 basis points a year over the long haul. And then from an HVAC standpoint, it is absolutely one of our attractive growth markets.

You highlighted the size of that market and our relative share position, but additionally, when you look at the needs of the consumer and the residential market and certainly from a commercial perspective, heating and cooling, we think we're uniquely positioned.

Additionally from a COVID perspective, as we look at indoor air quality as being a potential huge driver for us as we go forward it has a direct link to that HVAC business. The reason I say I think we're uniquely positioned is many of the customers in the HVAC business do both plumbing and HVAC work.

And we have a very successful plumbing business across all 50 states in the U.S. and then into Canada. And so the ability to offer a very unique customer experience for the HVAC business group.

While at the same time offering a very unique experience for the plumbing side of the business allows them to shop at one location to leverage the infrastructure and the relationships of our organization and should allow us to grow significantly faster. You highlighted the manufacturer input.

We have great relationships across a variety of OEMs, and making sure that we have access to product lines to take care of that opportunity is hugely important. With that I [indiscernible] on any additional from Mike or Bill..

Yeah, Kevin, listen, thank you. Well, given your question really relates to good sort of good cost in Q4, and what about the future, probably be a little rich of me to comment about the future, given that Bill is on the line.

So Bill, why don't I hand over to you and introduce you to Will and the team?.

Yeah, great. Thanks Mike. First of all, let me just say how honored and excited I am to step into the role. Look forward to meeting many of you virtually over the next couple of weeks, and then hopefully soon in person when appropriate.

Look, to Kevin's point from a cost perspective, as we were going through the lockdowns, we did first flex really hard on the temporary items and actions. At one point we had about 2,500 people that were on temporary furloughs or temporary layoffs. Recall the revenues were down about 9% in April.

Clearly, we then shifted focus towards the future, setting up the cost base for certainly an uncertain environment, but the revenue base that we expected to be operating in coming out of the initial lockdown phase, that's where we took the action on the 5% of heads in the U.S.

To Kevin's point, revenue was a bit better than we expected coming through Q4, most of those temporary actions are now brought back from a cost perspective. Because of those actions, and because of slightly better revenue, we certainly had a good solid Q4, certainly from a flow through perspective and a profit flow through perspective.

As we manage into Q1 and into this fiscal year, as we look forward, you could expect some of that cost base to come back if revenue exceeds those expectations. But these are things that we manage day-in, day-out, month-in, month-out very closely across the organization.

Maybe just to put it in perspective that the 1,400 people that we reduced from the organization, remember we've got about 1,400 locations. So that's about an average of one per location. So, these are very tactical decisions that we make day-in day-out, and we'll be very cautious as we move forward into the new fiscal year..

Thanks, Bill. Thanks a lot..

Our next question comes from Priyal Woolf of Jefferies. If you'd like to go ahead with your question please..

Hello. Thank you for taking my question.

Can you hear me, okay?.

We can Priyal. Thank you..

Okay, brilliant. So, I've got three questions. The first one is just on current trading.

So, obviously in the U.S., you said, you're back to organic growth since August, can I just double check that this does mean your back to organic growth in your core blended branches division as well? Or is this more just a function of really strong growth in some of the smaller units like e-business? Second question is just on M&A, I know you said you've got a pretty decent pipeline, but has this pipeline improved through COVID? Are there more sort of distressed assets out there that you could pick up? And then the last one is just a [indiscernible] says that you will go back to shareholders in due course, in terms of approval for that primary U.S.

listing? Can I just push you in terms of, you know a tighter timeframe in terms of that? Thank you very much..

Thank you, Priyal. In terms of current trading, as we indicated, we're really pleased with the way in which we've had sequential recovery from the springtime through the close of the fiscal year and into Q1. I'll let Bill comment on where we sit in terms of blended versus the rest of the businesses, but generally speaking, we're pretty pleased.

If you look at the different pressure points that we have on the business from an order channel perspective, our residential trade business, our builder business and showroom business performing quite well, commercial a bit more challenged, and so that that gives us a pretty nice balance actually for what we had expectations.

In terms of the pipeline for M&A, we don't see distressed assets out there. I think we've said before, Mike said it very well on past calls that our local competition runs their business quite well from a cash perspective, and can really, I use the words hunker down to take and see themselves through a challenging period.

I do believe, though, as we go through COVID and beyond the investments necessary for foundational technology for what an omnichannel experience looks like, for the tools that are necessary to drive this business, I do think will create opportunities for us to acquire businesses that have great local relationships, that we can plug together with that technology, with that supply chain, with that breadth and depth of product offering to make them more successful.

So that's what I'm most bullish about in terms of bolt-on M&A as we look forward. And then from a second listing onto a primary, we've got a lot of work that we need to do right now.

And so when we use language, like in due course, it really is to reflect the fact that we got work to do around SEC, Sarbanes-Oxley, but most importantly we've got work to do to run this business appropriately through a challenging environment. And so, we're not going to get ahead of ourselves.

We have that view of the future, and the board has stated that publicly, but we first need to set up that and stand up that secondary listing, run the business appropriate to really uncertain markets and continue to deliver. So, that's where we are.

Maybe, Bill, you want to comment a little bit more on Blended and eBusiness?.

Yeah, so blended, getting back about flattish, I would say as we entered into the first quarter, and then the strength, as Kevin mentioned, from an HVAC perspective from a Waterworks perspective performing very well delivering on balance that low single digit growth..

Thank you..

We have another question. This one comes from Kathryn Thompson of Thompson Research Group. If you'd like to go ahead with your question, please..

Hi, thank you for taking my questions today. And I'll just hand the questions out individually after answering them. The first area I want to focus on is on plumbing, and this is really feedback that we've received over the past two to three months. And it’s from our U.S.

contacts that are pointing toward an increase and a pretty meaningful one for demand for Commercial Plumbing products. So this would include, mobile hand washing stations and water filtration systems.

And they did – this is a change in trend line for commercial demand, versus more DIY demand, and calendar Q2, could you clarify what you're seeing in the field for commercial, particularly against the backdrop of what could be perhaps the biggest non-discretionary remodel that we're seeing in public spaces? Thank you..

Okay, thank you, Kathryn, very much appreciate it. From a commercial demand perspective, and you're right, there are different ways of working, there are going to be different demands on what commercial space should look like, and what those retrofits could look like, you mentioned a few of them.

The other area that we're seeing are quite frankly, very simple retrofits, small retrofits on indoor air quality, filtration and the like. And we are taking advantage of that today. Although it's not material in terms of what the overall revenue impact is at this time.

I think more broadly, from a commercial perspective, what we're seeing is, there's certainly an effect out there as we look at multi-trade commercial development and the length of time for a project, making sure social distancing is in place, making sure that the spacing out of trades is done, it'll lengthen the time of a construction project to a certain degree, but we're pleasantly surprised with the lack of cancellation of projects or pausing of projects that we're seeing across the bulk of our business, although we remain cautious, because we certainly know that there's going to be pressure on bidding activity and funding for projects that may have been [previously in the pipeline] around areas like hospitality, office retail and the like.

But as we've discussed, the need for data centers, the need for distribution capacity, certain education, and health care assets, although not as much are really – we're really bullish from that perspective. So, we're more cautious on the commercial market, but pleasantly surprised as to what we're seeing across the nation thus far..

And tagging along that with HVAC, we see no – a lot of opportunities with HVAC based on our primary research as there is increased focus on airflow at public spaces.

I take it from your prepared commentary you're seeing more positive trends right now on the residential side, what types of conversations are you having with commercial, as buildings are being reconstructed to the face it post-COVID world?.

Yeah, the bulk of our HVAC business is in fact residential, most of our commercial work is in the light commercial area, although from a VRF perspective, we are engaged in the larger commercial market.

And then certainly, we have a large mechanical commercial business on the plumbing side of our world that has, you know, some impact from an HVAC perspective. I think residentially we're seeing some pent-up demand, as well as good impact of residential new construction.

The biggest issue right now candidly from an HVAC perspective is just making sure that we've got good access to product.

If you think about a perfect storm for our business in HVAC the pandemic hit about the time that typically distribution builds up some inventory levels and manufacturers are ready for the oncoming summer season, and so there was a bit of disruption and dislocation there.

And so making sure that proper access to product and leveraging our supply chain and making sure that we can take care of customers on the residential side is very important.

And then as we talked about, from an indoor air quality perspective, we think it's – call it roughly a $10 billion opportunity potentially, for us, as we move forward across residential and commercial.

It's a big market; we're just now starting to analyze what we think our role can be, but that business is growing rapidly for us right now off of a fairly low base..

Then following up on your U.S.

margins, the way we looked at it for Q4, your trading profit margins expanded over 100 basis points, despite a pre-challenge top line as you're managing through the quarantine and coming out of that, you have made some comments on just the flexibility to model, but what we'd like to better understand is how much more is one-time in nature? And how much structural cost you've been able to take out? And also clarify what is any mix impacted margins in the quarter?.

Yeah, Kathryn it’s Bill. So, let me jump in on that. So, first off from a structural cost standpoint, I think you should think back to the exceptional charges that Mike outlined that's the real go forward take out of ongoing heads from a labor perspective as well as the consolidation of those 70 branches.

Again, on those 70 branches, about half of those were physically closed by the end of the quarter. The other half are going to come through principally in Q1. And that really gets that a bulk of our cost base, you know, 60% roughly of our cost basis in labor, another 15% is in infrastructure cost.

If you go back to your comment, though, on the trading margins, you're correct, certainly in the U.S. at about a 10% trading margin in Q4. Again, back to my earlier comments, very pleased with that result, most of those temporary actions that we took, again, the 2,500 people that were temporarily furloughed or laid off, those 2,500 are now back.

The over time that we reduced significantly in Q4, part of that is back and that's where we will remain very cautious as we move forward to manage that over time, as well as the permanent ongoing headcount up or down depending on the volumes that we see..

Okay, final question goes into the bucket of, it seems conservative.

First on the top line guidance for flattish, maybe some puts and takes based on that outlook? And then second, ending the fiscal year with pretty incredibly low leverage at 0.6x, [what shall we] read into this and how should we think about growth initiatives going forward? Thank you again for answering my questions today..

Maybe I'll take a first cut. Bill, Mike jump in. On balance, we see some green shoots and are positive around the residential side of the business.

As you think about new construction residential, we are positive about single family new construction, not the least of which is what you see in a COVID environment and the desire for people potentially to want single family construction, expanding of the commutable distance, given the nature of remote work and the acceptance of remote work, low interest rates, pent-up demand, and then obviously, from a starts perspective seeing 1.4, and you know, plus two on that is very positive.

We also see some positive around home improvement as you look at LIRA being plus two.

So, even if you take mid-single digit positive from a residential perspective, I think that offset starts to look as you get to the commercial side of the world and looking at what ABI looks like below 50 for six months and what we're seeing from an overall project funding perspective and the uncertainty around the commercial market.

And then, industrial remains a bit challenging, you know, plant shutdowns in our PVF business getting in there and doing maintenance repair and operations inside those plants still remains challenging, oil and natural gas, and the like.

And then, the civil markets, when you look at the funding levels for local and municipal government and what that might mean to the public works construction of our civil markets. So, [when] we take all of that together and balance it out, you know our Fire & Fabrication business as part of that commercial market.

On balance, what we get to is a roughly flat market. That said, those numbers are changing fairly quickly as you look at a COVID world and I think that there's still enough uncertainty out there. Are we pleased with what we've been able to produce from a revenue standpoint [and outperformance]? Absolutely.

Will we continue to drive for that? Absolutely. But there's just a fair amount of uncertainty as we go into the latter part of our first quarter and really the rest of the fiscal 2021.

In terms of that low leverage ratio, we think it's a prudent place to be, given that uncertainty in the market and the strength of our balance sheet is a very positive thing for us, especially as we look to get back into good solid bolt-on M&A, and again, trading through challenging markets, where [indiscernible] from a U.S.

perspective, we don't even have consistency in young people going back to school. And so, what are we going to see from a virus perspective? Maintaining that conservative position is prudent at this time and we're pretty pleased with where we are..

Thank you..

Thanks, Kathryn..

We have our next question. This question comes from Keith Hughes of Truist. If you'd like to go ahead with your question, please, Keith..

Yes, thank you. Kevin, in the prepared statement, you had discussed future initiatives and getting closer still serving your contractor..

Hi, Keith. I'm sorry. Could you speak up just a touch? We're having trouble, Keith..

Yes. All right.

Is that better?.

Yes. Thank you..

Is that better? Yes, okay. So my question is, Kevin, in your prepared statements, you had discussed getting closer to the, you know, in-use customers still serving the contractor, but getting closer to the end-use customer, which has always been part of the commercial world more than residential.

So, I guess my question is, are you talking about extending that further into the, let’s call it non-residential world or is that an initiative in residential? And how do you get that goal accomplished?.

Yes, Keith, thank you very much.

We see it across all of our different businesses and it can't be firm enough in saying the trade professional is our customer and we work hard every day to make sure that we deliver that value, breadth and depth of product, supply chain, consultative experience, being able to find search special items to make their jobs easier, making their business more successful, but where we really need to go, especially from a product strategy perspective is working with designers, engineers, architects.

Is it commercial? Yes. Is it infrastructure? Yes. Municipalities? Is it designers in the builder showroom space? Absolutely.

So just making sure that we are up funnel across all those different aspects helping our contractor to make sure that we have a smooth flow of product that meets the design criteria for that end user, that stakeholder, but at the same time, we're guiding what that product selection looks like to benefit Ferguson and our contractors.

And so, that is not just own brand.

That's also our partner vendor relationships on the branded side where we've got great exclusives that are unique to Ferguson that allow us to have a specification inside of a project giving us a better chance to secure that overall job, while at the same time, helping our margin profile in delivering a better product for the end user with good timeliness for the contractor.

So really, it's across all of our different business groups. It is in person through relationships, but it's also through technology, especially as we start to see building information modeling becoming a bigger part of not only the commercial business, but beyond..

Okay, second, final question, and a follow-up to Kathryn’s, as you looked at business, the last sort of 60 days, I think you’ve, you know, shown some caution on your non-residential business.

If you look at those three, the commercial, the civil infrastructure and industrial, in the last couple months, which of those has been the weakest market?.

Keith, could you repeat that last part? We lost you on the last part..

Yes, sorry. Let me speak a little louder.

Yes, which of the non-residential businesses, you know, you define them as commercial, civil infrastructure and industrial, it seems as though they're weaker in residential in the last couple months of business, which of those is the weakest? Which is causing the lowest trend?.

Industrial is. And again, we don't have a tremendous amount of exposure to oil and natural gas, but it is the weaker of all those types of businesses, really, commercial then civil, municipal and industrial..

Okay, thank you..

Yes..

We have our next question. This question comes from Yves Bromehead of Exane. If you'd like to go ahead with your question please..

Good afternoon, gentlemen. Just a few questions on my end, could you maybe come back just on the end-market developments, and especially looking at the comments you've made on the municipal funding? You kind of use a backward [indiscernible] on the press release.

I wanted to understand if you've seen any improvements with regard to that sub-segment in recent weeks? And how you think going forward on that specific point? My second question is on your slide where you show your positions and your vertical exposure, I’m trying to figure out maybe with your new strategy with a U.S.

listing, looking ahead in next five years, where do you see the largest opportunities in terms of market growth, but also in terms of potential external growth opportunities through M&A? And maybe just a last question, your outlook is essentially saying that with some product of your exposure, you expect flat market conditions.

Can we extrapolate the outperformance of 2019 to 2020, which would suggest a low-single digits environment for Ferguson? Thank you so much..

Great. Thank you very much. And from a municipal perspective, I think this is more our caution around what might happen. We haven't necessarily seen that today.

But if you look at the stress and strain put on local and state budgets, given the COVID response and the need for funding, you do get concerned as to whether or not the general fund versus wastewater infrastructure, how that interplay happens.

The good part about that is that our waterworks business, as indicated during the presentation, is a very balanced business. So yes, municipal, yes, public works construction, water, wastewater treatment plants, but also new residential and commercial. And in fact, we've seen good new residential work across the bulk of the U.S.

in terms of that new residential work inside of waterworks. So, it is more a concern of caution about what could happen. From a vertical exposure and largest opportunities, both in market and M&A, I think you see a couple that we're really working hard to grow and expand in. HVAC, as we’ve spoken about before, is one of them.

Certainly, the commercial maintenance, repair and operations business, what we call Ferguson Facility Supply, which is a huge, very fragmented market with good trading margins and good returns on capital, where we are continuing to make good headway in conjunction with abundant branch infrastructure to make sure that we can offer same day next day product availability to that customer set.

But I can't reinforce enough, across all the different businesses that we operate in, we do see good opportunities both with M&A, and then, depending on the market, what does that organic investment look like depending on the market conditions that we operate in. And then, from a flat perspective, yes, we intend to outperform the market.

We typically pushed for, call it, 200 basis points to 300 basis points worth of market outperformance making sure that we do it in the right way, achieving value for the services that we provide reflected in our gross margins and value for the relationships, both digital and human..

Thanks a lot. Thanks..

Thank you..

We have our next question. This question comes from Gregor Kuglitsch of UBS. If you'd like to go ahead with your question, please..

Hi, can you hear me well?.

Yes, Gregor..

We can, Greg..

Excellent, thank you. Brilliant. I've got a few questions as well. Maybe one big picture one on the margin potential of the U.S., so I think last year, you were slightly shy of 9%. That's including obviously IFRS 16.

You're flagging kind of technology investments, some cost savings, and I don’t expect you to sort of give me a precise basis point number maybe for this year. But as you maybe take a five-year view, what do you think this business is capable of doing? I mean, could we be talking about double-digit? Or is that too aggressive? That's question one.

Question two is relating to the M&A commentary again, so I want to understand if your kind of approach to M&A has changed a little bit, maybe it hasn't. But I just want to explore whether you're prepared to maybe go for a slightly larger deals.

So historically, the last decade or so you've kind of done 1%, 2% annual sales contribution from acquisitions.

I want to understand if you're kind of flagging a step change in that? Or it's just going to be more of the same? And then on e-commerce, if you could just – you gave us some growth numbers in your introductory remarks, if you could just remind us kind of the absolute numbers? So, I think the B2C is relatively easy, but in terms of the B2B, how many of your customers are basically using online channel? How many subscribers have you got? Just so we can understand the sort of absolute figures there because I think you were mostly flagging the rate of growth relative to March, but I want to understand where you are in absolute terms? Thank you..

Great, thank you, Gregor. I'm going to take a quick turn on all three of those questions, and then turn it over to Bill for a little bit more depth. From a big picture view, in terms of double-digit being too aggressive on margins, we do not put a ceiling on that.

And we have historically looked at gross margin expansion as a good reflection of the value we provide and that's been the driver of trading margin expansion. We really need to look at both and I think that you're seeing that, hearing that in some of our comments for today.

How do we get 10 basis points worth of gross margin improvement annually that is sustainable, built on value? And then, how do we make sure that we invest in technology, which are already embedded? That constant movement from a technology perspective in both OpEx and CapEx is embedded inside of the financials and what we are talking about today.

But we need to have that in order to drive the productivity of our sales force, the productivity of our associates, things like distributed order management technology that sort of activity that makes our people more efficient, but also gets great value for our customer and makes us relevant for the long haul.

Secondly, on the M&A side, there is no step change to what you're seeing.

We will look at all opportunities, big and small, that is our responsibility, but when it comes to our ability to take a small-to-medium sized bolt-on with local relationships, bring it into our organization, take out some overhead costs, add technology supply chain to local relationships, it's a good solid, effective way of growing our company that also protects and enhances shareholder value.

We also want to do capability acquisitions.

What does that mean? Yes, valve and automation, and what are our capabilities in a local market that we can spread across a larger book of business, but also own brand and bringing product brands into our organization that we can use across our digital in bricks and mortar channels to make us more effective and make the business that exists more relevant.

From an e-commerce perspective, I think that you will have seen good growth in B2C e-commerce, good adoption of digital tools in our B2B customers, but we look at it more than just revenue.

It really is that stickiness of how we bring value to the trade professional, so that they can check order status, look at the truck coming down the road and understand when they need to come off the 14th floor of a mid-rise to get their materials. Things like rich product content, sourcing, all those things are equally as important to us.

And what you'll see is, our B2C operations, really coming together with our bricks and mortar operations in Ferguson, so that the best digital platform that exists for Build.com for example, starts to really enhance what that show room offering looks like and really starts to build an omnichannel operation that's very durable.

So, with that Bill, any comments from you on margin?.

Maybe just on that first piece, Kevin, on margins to fill that out a little bit more to your point, we don't put a ceiling on it, we do [Technical Difficulty] incrementally improve year-in year-out in supportive markets.

Not only the gross margin side, but Kevin talked about the technology investments, technology spend for us today is about 6% of our cost base and that continues to grow.

We absorb that in the ongoing cost base of the overall organization because not only does it improve the customer service aspect and the capabilities we bring to the customer, but Kevin, you also mentioned the productivity side.

So in addition to that OpEx investment from a technology standpoint, we also invested about $100 million of CapEx this year, again, embedded in our overall CapEx guidance, but in technology because that's what’s going to make us better, not only for those customers, but from a productivity standpoint, so we could get better operating leverage over time..

Thanks, that was really helpful. Thank you. Good luck..

Thank you, Gregor..

We have our final question. This one comes from Steven Goulden of Deutsche Bank. If you like to go ahead with your question, please, Steven. .

I just wanted to ask you on – obviously, you’ve talked a lot in the Q&A about M&A and bolt-ons, et cetera.

You said earlier on that you're not really seeing any kind of fire sale assets, or particularly desperate sellers right now, but can you give us a little bit of a feel for the typical multiple that you'd be paying kind of on an EV/EBITDA basis if possible just because obviously that kind of links you to your trading profit focus? And then, you know, typically, what would you – what kind of margin would you be buying a business like that on? And how quickly could you sort of get it up to group levels of, you know, traditional group margin, basically, through synergies? And I guess, just to, sort of put that into context, you know, obviously, your buyback is currently on pause.

Clearly, if you're able to pick up these businesses that, you know, let's say, for example, 9x, 10x and your stocks are say, 14x, 15x, does that have any implication for a, you know, your willingness to do more M&A than to do a buyback and be obviously the potential mix of equity versus debt that you may use in any particular potential acquisition?.

Maybe I'll take very quickly the last portion, and then hand it back to Bill. From a buyback perspective, M&A versus buyback, you know, I really focus on what our capital priorities are.

And when you look at organic investment, dividend [go through cycle] and M&A followed by return of capital to shareholders and we're really, from a buyback perspective, just wanting to better understand how we come through this COVID environment, the uncertainty that's in all of our markets today, and really need to evaluate that as we move through our fiscal year from a decision-making standpoint.

But maybe I'll hand it back to Bill to get after returns and multiples and what have you..

Yes, I would tell you, typically, we're seeing and I'll give you somewhat of a wide range on multiples because every deal is different and unique, and clearly brings different synergies to the table, but in general, I'd say we're in that 7x to 10x is what we're seeing in the marketplace over the last couple of years.

You know, from a margin standpoint, overall, clearly, the vast majority of those acquisitions that we do have a lower margin, lower trading margin than what we have and we look to bring those synergies in quickly and get them up to our trading multiple over a couple of years.

If you think about the traditional bolt-on, M&A deal that we do, we go in quickly, we put them on our system, we hook them up to our supply chain, we get to distribution and the fleet synergy, we get sourcing synergies, and then we can take a little bit of back office costs out as well in those acquisitions.

Those are typically, kind of how we approach the M&A front..

Great. Thanks a lot..

Steve, it's Mike. The only thing I would add is just remember that, you know when we buy businesses, the fit is so important for us. So, there's a lot of sort of corporate finance theory, but the most important thing for us is, you know we're buying people. And they often don't end up on our balance sheet, a lot of goodwill does.

And I've always said, you know, we need to buy good quality businesses and good relationships that fit with Ferguson. And that is really, really important for us, as well as the financial theory, because people can walk out the door, and then you're left with a whole load of goodwill to write off.

So, it's the people in the relationships which come back to the core values of Ferguson that we care just about in M&A, as well as [indiscernible] theory, which sort of goes alongside it..

Great. Thanks a lot. That’s very helpful..

Well, given that that's the last question, if I could echo my earlier statements that we began this call, great to welcome Bill into the new role really looking forward to what the future holds for us. And I can't let the call go without saying again, thank you to Mr.

Mike Powell, wish we were together on the same side of the ocean for this call, but you've been an incredible help to me, and an incredible asset to the growth in and development of our company. So, thank you very much. And thank you for your time today on our call..

Ladies and gentlemen, this does conclude the call for today. Thank you for joining and you may now disconnect your lines..