B&M European Value Retail SA

LSE:BME

Earnings Call Transcript 2021-Q3

[Operator]

Hello, and welcome to the B&M Q3 Trading Update Conference Call. I will shortly be handing you over to Simon Arora and he will take you through today's call. [Operator Instructions] So now over to Simon Arora, Chief Executive at B&M.

[Sundeep Arora, CEO & Executive Director]

Good morning, everyone, and Happy New Year to you all. I have with me this morning, Alex Russo, our group CFO; and Jonny Armstrong, our Head of Investor Relations. I'd like to start our call with a few brief opening remarks, and then, of course, we'll go straight to Q&A. I would mention that Alex and Jonny are available after the call, if you'd like to follow up on any specific items. As you will have seen from this morning's statement, we have continued to deliver strong sales growth through the golden quarter. Our total group revenues in the quarter grew by over 22% year-on-year. In the U.K., our core B&M fascia saw total revenue growth of 26% and a like-for-like figure of 21%. That total sales growth in the U.K. fascia was helped by a strong contribution from 16 net new stores that we opened in Q3. Now we wouldn't normally open that many stores in the golden quarter due to the disruption it would cause. However, we did, this year, have some catching up to do from a quieter first half that has been previously explained. As we look into the final fourth quarter of this financial year, we're announcing today that we believe we will open a further 18 stores, which means that for the full financial year, we will have opened a gross 45 new stores. This compares with a previous guidance that the range of new store openings would be between 40 to 45 gross. Turning to trading during the quarter in the core B&M business. Operationally, the team executed peak season really well. Our operating costs were well controlled, both at store level and in distribution. Important to explain that we did not resort to any unusual discounting or promotional activity, and in fact, we did practically nothing for Black Friday compared to previous years. The strong sales growth meant that we exited the quarter very, very clean on stock. In fact, I'd say that in terms of seasonal stocks, such as Christmas decorations, the best ever sell-through in the history of running this business, which extends back 15 years for myself. The benefit of that extremely strong sell-through is, of course, going to be felt in gross margin, both for the quarter that we're just updating you on, but also, in fact, the fourth quarter because, of course, you have less residual stock at store level to clear out below cost in a January sale. Turning to the other fascias within our group. Our convenience store business, Heron Foods, continues to perform well. It delivered another solid set of like-for-like figures for the quarter, and we remain highly confident with our business's steady progress over the years ahead. Turning to the specifics of Heron Foods. We expect to open a further 8 new stores in this final quarter, meaning that it opened 20 for the full financial year, and that's in line with previous guidance. Turning to our French business. In France, we sell very little food, drink, household and personal care compared to our U.K. business. As a consequence, Babou was dramatically impacted by the 4-week lockdown in November in France. The fact that sales over the quarter were only 1% down on the previous year, despite that 4-week lockdown period out of the 13 weeks of the quarter, I think that tells you how well that business traded in October and December when it was not subject to those lockdown restrictions. Over the quarter, we continued with our program of rebranding Babou fascias to B&M fascias. And subject to any further disruption from lockdowns in this final quarter, we plan to convert a further 13 stores, 1-3 stores from Babou to B&M at this financial year. So looking forward from the end of Q3 and now into Q4, it's clearly very early to say how Q4 is going to trade. There remains a lot of uncertainty. We're only 11 days into that quarter. However, with December behind us and on the strength of current trading, we have, today, raised the bottom end of our previous guidance for the full year EBITDA. At the beginning of December, before December trading, we had guided an EBITDA figure of GBP 520 million to GBP 570 million. But today, we narrowed that range to GBP 540 million to GBP 570 million. Alongside that, you'll see that we are awarding our store colleagues and our distribution colleagues an extra week's wages. And we also, as a point of detail, closed our stores on New Year's Day this year to reflect the extreme challenges that our colleagues went through in delivering this strong growth period in the context of the pandemic. Finally, I'll conclude by commenting briefly on the special dividend that we've announced today. One remarkable feature, of course, of our business model is the high cash generation alongside the growth. We are a capital-light business, and we have a clearly stated capital allocation framework. In keeping with that framework, the Board has agreed that it was appropriate to return a further GBP 200 million of surplus cash to shareholders, which I think underlines the confidence we have in the strength and resilience of our business as we move forward into 2021. That completes my opening comments. And Alex and I would now be pleased to take some questions. Thank you.

[Operator]

[Operator Instructions] Our first question is from the line of Richard Chamberlain from RBC.

[Richard B. Chamberlain, Managing Director of Consumer Retail]

A couple of questions, please. You kindly gave us some color on the space outlook for the rest of fiscal '21. What's your sort of thoughts on the outlook for the next fiscal year to 2022 in terms of number of stores you expect to open gross and net, please? That's my first question.

[Sundeep Arora, CEO & Executive Director]

Yes, certainly. So the pipeline for the next financial year is looking perfectly healthy. We're probably ahead of where we would normally be at this time of the year. We're still 3 months to go before the beginning of the financial year. And so what we're guiding is a gross opening figure of around 45 stores. But what I'd say to you is we don't disclose a net figure because some of those closures that might take place over the year haven't been decided or announced. But the important thing from a modeling perspective is that the EBITDA impact of closures is actually typically a positive impact. And the way to demonstrate that to you is that if you look at Page 6 of our interims, we have an EBITDA bridge, that's a year-on-year evolution of EBITDA. And what you'll see is that the stores that we closed in the first half, the impact of those closures was actually a positive GBP 5 million accretion to year-on-year EBITDA. So I wouldn't think too much about closures because the stores that we close are ones where we've typically relocated already to a bigger, better store in the catchment and where we're just waiting for the lease to expire.

[Richard B. Chamberlain, Managing Director of Consumer Retail]

Okay. That's great. That's very helpful. And just one more, if I may, on sort of seasonal stock availability. I mean you mentioned it sounds like you had a very, very clean exit and very clean -- extremely clean inventory position. But I mean how was the experience on sort of seasonal inventory availability? I mean was there a big sort of pull forward in demand to November and you sold out of a lot of seasonal lines?

[Sundeep Arora, CEO & Executive Director]

You've hit the nail on the head, Richard. I mean you've exactly described what happened. So the standout feature of the golden quarter that just gone is that peak took place a couple of weeks earlier than normal which I think reflects the fact that people had the time and they knew they weren't going away or going out so were investing in their Christmas decorations and Christmas shopping. I should explain that for a product range like Christmas decorations, the volumes that we buy, the inventory that we buy is largely decided in January of the year. So in January 2020, we will have fixed the volumes for our Christmas decorations ranges. Now you'll recall that in January 2020, COVID-19 wasn't even a phrase that was in our mindset. And so that, inevitably, was a limiting factor on achieving 20% plus like-for-likes on that seasonal product. And so you're absolutely right. By the time we got to the first week of December -- the second week of December, in many stores, the entire aisle that was typically given over to seasonal decorations was effectively empty. It's sold out. And so yes, departments like Christmas decorations, I would say, on a full year basis, would have been low double-digit as opposed to the 20%-plus for the rest of the departments, but that's purely a function of not having the inventory because of the lead times.And also remember that the one event that didn't happen in the golden quarter was Halloween. So Halloween was effectively mothballed and kept in the DCs rather than being sent to stores because, obviously, in the circumstances of the restrictions, trick and treating and Halloween parties were just not on the agenda. So I think what I'm saying is that, yes, there were some timing issues around when people went and did their Christmas shopping, there was Halloween, there was a limiting factor of Christmas decorations. And so overall, I have to be very blunt, Q3 like-for-like exceeded my personal expectations.

[Operator]

Our next question is from the line of Warwick Okines from BNP.

[Alexander Richard Edward Okines, Research Analyst]

I've got 3 questions, if I may, please. The first is just following up on from Richard's question. Do you think that the inventory position that you enter Q4 into will impact your sales growth in Q4? Or is clearance not normally that material? Maybe just take that first, and then I'll move on to the next ones.

[Sundeep Arora, CEO & Executive Director]

Certainly. So in terms of the first week or 2 of the January sale, well, actually, it starts on Boxing Day. Yes, you lose some sales, but they're good sales to lose because those sales are loss-making sales. So clearly, our like-for-like cash gross margin is well ahead of the LFL number. And it's the cash gross margin that obviously matters. But that said, take this with a huge caveat because we're talking about no more than 10 days' worth of trading, and I really don't want to be modeling the business performance based on 10 days trading. But if you strip out the fact that New Year's Day we were closed, so if you exclude that from both last year and the season we're talking about, the LFL over that 10 days worth of trading is actually consistent with the Q3 LFL. So we haven't seen a significant moderating of our LFL and a remarkable feature of the trading performance over the year-to-date, actually, is that on a quarterly basis, it's coming out in the 20s every quarter, and -- as I say, so those 10 days of trading that we've got so far under our belt in terms of this final quarter, a very consistent number.

[Alexander Richard Edward Okines, Research Analyst]

Secondly, I know it's early days, but Babou has been running click and collect for a few months. So just wondering what your early experience has been of that and, actually, what the customer appetite for it was like when your stores reopened in December.

[Sundeep Arora, CEO & Executive Director]

So it varied from store to store. And I think we're learning from that little trial. But in terms of materiality to group performance or any major strategic change in direction, I would say that, that -- we're not at that point. Online, click and collect, home delivery of large bulky items, these are all questions that we're constantly reviewing. But as we sit here today, looking at the last 2, 3 months of the financial year, in which over the year, we're on a year-to-date basis at plus 22% like-for-like, the phrase, if it's not broken, don't fix it, does come to mind.

[Alexander Richard Edward Okines, Research Analyst]

Yes, yes. Absolutely. And sorry, just finally, on the balance sheet, if I may. I think previously, you've talked about the potential for working capital unwind at year-end. I presume that looks a fair bit less likely now given your inventory levels coming into the final quarter. Maybe just comment on that and perhaps on year-end net debt expectations.

[Alejandro Russo, CFO & Executive Director]

Alex here. Yes, you're right. We don't expect to see any unwind. I think the stock position, it's in a good shape heading into Q4, as Simon says. So I think we can work on the assumption that there will be a positive working capital as we exit FY '21. In terms of leverage, the way to think about it is going into March 2021, if you just take, let's say, half of the guidance range, basically after the second special dividend that we are just announcing, think about a leverage ratio just above 1. Did that answer the question?

[Sundeep Arora, CEO & Executive Director]

And Warwick, the other thing I'd mention on inventory levels as we head into the spring is that many of you will have seen reports of disruption to supply chains because of shipping issues out of China or issues at ports. I'm pleased to update you all that, actually, B&M's rather insulated from that. We're in a good place in terms of launches of spring-summer '21 ranges. The inventories arrived. It's going out to stores as we speak. And we do benefit from our scale in this respect and that with the shipping lines, we're one of their largest customers in the U.K., and that gets us a service level and pricing that isn't what you've been reading about in the papers in terms of being highly erratic. Our arrangements are all contractually agreed for the year rather than being exposed to fluctuations in the spot market.

[Operator]

Did that answer all your questions? Warwick?

[Sundeep Arora, CEO & Executive Director]

Yes, I think he did. He had 3, and we've done with 3.

[Operator]

Yes. Okay, lovely. And our next question is from the line from Adam Cochrane from Citi.

[Adam Cochrane]

A couple of questions from me. First of all, when you look at the new customers that you've obtained over the course of the last 6 months, do you think it's fair to say that most of those new customers, given the results, have been maintained in this period? And would you be able to give any flavor on how the AOV has trended? What the footfalls look like? And then the second bit is, I think you said it's strong across all departments, but if you could be brave enough to call us out 1 or 2 really standout categories, that would be great.

[Sundeep Arora, CEO & Executive Director]

Certainly. So in terms of new customers, you're absolutely right. The remarkably consistent LFLs in the low 20s suggest that those new discoveries of the B&M model from earlier in the year -- earlier in -- middle of last year, they seem to have stuck with us. So that all bodes well for the future. Alex, do you want to take the question on sort of AOV versus footfall customer count?

[Alejandro Russo, CFO & Executive Director]

Yes. I think if we look at the transaction pattern that we had at the half year, you can extrapolate that continuing trend into the end of Q3. And I think with the early signs we have in January, I think we'd expect that orange line, as we had it back then, basically, to continue to converge to nil. So the pattern is pretty much consistent. Giving you a bit of color in terms of the categories, the way to think about grocery on Q3 would have been fairly similar level of strong LFL performance compared to Q2. And if you look at the nongrowth -- nonfood grocery side, think about maybe almost 3 to 4 percentage points improvement on LFL in Q3 compared to Q2.

[Sundeep Arora, CEO & Executive Director]

So what I'd say about the different categories is that both grocery and nongrocery performed really, really well. Grocery -- and when we say grocery, we mean not just food, we mean obviously, household and personal care, the pet food, the drinks and confect, et cetera. Our LFL performance on grocery was materially ahead of the numbers that you've seen coming out of the big 4 materially ahead on a year-to-date basis and indeed in the quarter. And then in terms of the nongrocery, strong performances where you don't have the inventory limited by being booked a year in advance, so really strong performances from DIY and from home where you can -- you buy as you go through, as you go along. Whereas a more limited but still remarkably strong performance in categories like gifting and Christmas decorations where the volumes were before the pandemic and before our experience of this step-up in LFL's run rates.

[Operator]

Our next question is from the line of Greg Lawless from Shore Capital.

[Greg Lawless, Research Associate]

Just thinking freely for FY '22 and realize you don't give guidance, but how -- just to ask it a different way, how do you set the business up given the tough comps you face? I'm kind of thinking there, stark staffing. And then just wondered, you talked there, touched there on gifting. Just I think last year, there was no standout toys. I wondered if you had any comments in terms of toys. And was there really a flight to quality this Christmas? Did consumers trade up? So given the way the shape of Christmas and probably fewer Christmas presents under the Christmas tree because you aren't seeing as much family buy a higher ticket price. Just wondered if you'd comment on that, please.

[Sundeep Arora, CEO & Executive Director]

So in terms of FY '22, we budget ambitiously. That's the nature of the culture within B&M. And so the commitments we have to make are on gardening, from Asia, for the spring-summer. And over the next few weeks, we'll be making commitments again for Christmas decorations for the autumn-winter. But it's important to understand that for all the other departments, we can react accordingly to demand. And so one thing that you see that's self-evident from the previous 9 months is that the B&M trading teams are able to take advantage of new customers being attracted to the business and responding with a supply chain that's very quick and flexible to make sure we've got the inventory to meet that demand. So yes, ambitiously. And we want to hold on to the market share in gardening, garden center products and now Christmas decorations that clearly we've achieved over the last 12 months. As we think about the competitive environment over the next 12 months, we see further capacity withdrawal from bricks-and-mortar retailing, which is supportive for holding on to that market share gain. Both our value proposition and our convenient retail park locations are all supportive of holding on to that market share gain. Turning to your specific question on toys. I think as our business has evolved over the years, as we've got more stores in the south, we've got more stores in affluent areas. And now as we think about our customer base that broadly reflects the U.K. shopping population and isn't skewed to lower socioeconomic demographics, we've got toys that are better quality in our range. We've got more branded product, more -- slightly higher-ticket product. And in an environment where kids aren't getting to school or they're not able to play with friends, it's probably quite predictable that they get treated to the toys that we sell. I think it's also worth mentioning that our toy range is very much directed under 10-year-olds. We don't need to sell toys to teenagers. And we recognize that, that particular age group is much more interested in electronic gaming and other forms of leisure as opposed to these toys. And that's one of the things that makes our toy department that bit more resilient and gives us that much more confidence as we go into the next year.Because on toys, I'm sorry, I'm going on a bit longer here, but exactly the same point applies. There is going to be capacity withdrawal, particularly in bricks-and-mortar retailing of toys. The obvious example is Argos, and we do hope to take advantage of that in terms of the bricks-and-mortar share of the toy market.

[Operator]

Our next question is from the line of Simon Irwin from Credit Suisse.

[Simon William George Irwin, Director]

A couple of quick ones for you. As you kind of go through the business in Babou now, what are your thoughts about the potential for expanding the overall number of stores, given you're going to be quite a long way through the rebadging process next year? I mean should we be looking at a significant increase in net store numbers, say, in 2 years' time? And secondly, can you just talk about what kind of rents you're seeing both on renewals and on newer stores? There are a lot of stories out there about the high street being, say, 30% overrented. Are you seeing that kind of reduction on rent renewals?

[Sundeep Arora, CEO & Executive Director]

So in terms of our French business, if you take a step back and look at the size of the market relative to the U.K., if you look at some of the size of the other competitors in the space, clearly, there's the long-term potential for our French business to be a multiple bigger than it currently is. It's only got 104 stores at the moment. But answering more directly to your question in the near term, we think we will end the current financial year with 57 out of 104 stores converted to the B&M format and fascia, which means that we still have, broadly speaking, half the estate to do next financial year, and that will be the primary focus. We'll probably do a handful of stores, new stores just to keep the store development teams occupied rather than purely focused on the reformatting. And so the opportunity for materially putting our foot down on the pedal on the gas in terms of new store openings is more an FY '23 opportunity in France. But the big picture here is that you look at Q3 that we just reported on, they managed to deliver a like-for-like of minus 1%, even though they were effectively practically closed for 4 weeks out of the 13. That is not something I would have set them the target of achieving if you told me at the beginning of the quarter that they were only going to have 8 weeks out -- so sorry, they were only going to have 9 weeks out of the 13 to trade. So really pleased with how the business has traded in October and December, and that bodes well for future trading when we've got this pandemic behind us. Turning to your question on rents. It's very, very location specific. If you've got a struggling shopping mall or a struggling secondary high street, actually, the rent reductions on renewal can be as much as 50%. I have to tell you that we've got some stores where we're just paying the service charges because there is literally no other alternative for the landlord other than having a void and having to pay the business rates themselves next year. But having said that, our estate isn't characterized by lots of stores in struggling or dying shopping malls. The vast majority of our sales, north of 80% come from out of town locations where we're stand-alone or on retail parks or next to large supermarkets or next to an Aldi, Lidl. And those locations, trading really well, as you can see. And on lease renewal, there is still strong support for those rents because, of course, we've not been signing up these stores at inflated rents to start with, no. Our store expansion has all been taking place post the 2009-2010 recession. And so we don't have an estate that was overrented to start with.

[Operator]

Our next question's from the line of Jonathan Pritchard from Peel Hunt.

[Jonathan Pritchard, Retail Analyst]

Just to develop that point a little bit on new stores. How's the excellence of FY '21 changed your sort of fundamental thinking on the potential of some sites? And what I mean by that is we could expect to achieve a higher profit density now than you would have thought 12 months ago? Or is it really there to dominate why the CapEx and the spend on the store is moving in, certainly, a direction that might be making the new store pipeline easier to generate?

[Alejandro Russo, CFO & Executive Director]

Jonathan, Alex here. The catchment potential, the way we size the opportunity has definitely reduced compared to historical metrics. So if historically, it would have gone for 20,000 or 25,000 households, we can clearly make the economics work, let's say, with 15,000 on a catchment basis. And I think that points to a good opportunity on the next 3 to 5 years. I think the level of openings, I think, is consistent and steady. I think we're very careful that we are not compromising quality. But the opportunity is definitely there, and in the long term, certainly increasing.

[Sundeep Arora, CEO & Executive Director]

And Jonathan, I'd add to that by saying that I can't emphasize enough just how good the openings have been this financial year. Our best store in the country opened in Q3 just gone -- I'm, obviously, not going to tell you where it is, but it's firmly in the south. It's not in our Northern heartland. And we were blown away with just how popular that store has been in a town where we had thought they probably never heard of B&M. And so I think the broader point is this. There can be a higher density of store locations across the U.K. and there is more white space in the U.K. than we had previously thought when we came to that 950-store target. But it's premature to come up with a revised number today because we still got another 5 to 6 years' worth of growth at our run rate before we even get to the 950.

[Operator]

The next question is from Andrew Porteous from HSBC.

[Andrew Ian Porteous, Analyst, European Retail]

Well done on a really successful Q3. Just wanted to build on sort of a few of the points earlier with my questions. From a store perspective, I mean, given your sort of your comments around capacity withdrawal over the next year, how do you think about things like the gravity of some of the locations you're in? Are you sort of mapping who you're next to? And do you worry a bit about some of those locations and sort of plan for the future in terms of relocations, if you sort of see the capacity withdrawal you're planning for? And then sort of linked to that, I guess, on the supplier side, I mean, clearly, you've had a very strong year this year. Are you seeing more and sort of better supplies approaching you as they sort of see the value of your route-to-market? And how do you sort of balance that opportunity with sort of maintaining the simplicity of the overall offer?

[Sundeep Arora, CEO & Executive Director]

So in terms of adjacencies and your first question about where do we locate our stores. The store that I just mentioned, the best store in the U.K. and in fact, when I think about the top 5 stores in the U.K. that are just our absolute stores of excellence, they're actually largely stand-alone. All they need to be is the right size with the garden center prominent on a main road with free parking, and we're off to the races. So we don't rely on adjacencies, but we don't shun away from them because we recognize that where we are co-located with an Aldi, a Lidl or one of the big 4, it's a complementary shop because we don't do fresh produce. We don't have meat counters, fish counters. We don't do fruit and veg. Our business is much more about general merchandise and ambient grocery. So yes, we're not reliant on others. And in terms of capacity withdrawal, I think, for us, the main point there is just every time these stores close, some of that turnover is available as market share, and we want to grab it in that catchment. And on the suppliers' point, Alex, anything to say on that? I think where we're on suppliers is that, that sort of happened a couple of years ago now for a business that's going to be turning over, over GBP 4 billion in the U.K. this year. Which supplier doesn't want to trade with us? We serve 4 million to 5 million shoppers every single week. Our website gets 1 million visitors a week. Why would you not want our products -- why would you not want your products in our stores?

[Operator]

The next question from Geoff Ruddell from Morgan Stanley.

[Geoffrey Frith Ruddell, Managing Director]

A couple of questions, please. The first one, could you just quantify how much the cost is of offering the staff the extra week's pay, please? Secondly, just to clarify on Greg's -- your answer to Greg's question. Are you actually buying for increased Christmas decoration volumes next year or planning to? And thirdly, while we've been on the call, Sainsbury's CEO has been quoted on the wire saying they've got staff absentee rates of about 8% at the moment. I was wondering if you're seeing something similar.

[Sundeep Arora, CEO & Executive Director]

Geoff, I'll answer your questions quickly, if I may. So in terms of the free -- 1 extra week wages and the cost of closing on New Year's Day, they're both material numbers. And being candid, the reason why the guidance, the upper end of the guidance hasn't been raised is because it was deemed, and it's quite right and proper that colleagues share in some of the success of the business this financial year. But I can't divulge the specific number for commercial confidentiality reasons. In terms of the Christmas decoration buy for 2021, we will seek to take advantage of the opportunity. And what we do is on a line-by-line basis, we look at what we sold in 2020, and then we extrapolate what we could have sold if we hadn't run out. So yes, we are firmly ambitiously looking to achieve growth because we recognize we didn't take advantage of the full opportunity in the season just gone. And then finally, in terms of store colleague absence, yes, it is challenging. But in terms of trading performance, it's not impacting us. I'd point you back to the wording I used earlier on in the call around, so far in Q4, the LFL on a comparable basis is as good as, if not slightly better than, the LFL in Q3. So not affecting trading, but of course, operationally, very challenging for colleagues and again, that almost supports why we're giving those colleagues an extra week's wages as a thank you. We'll quickly go to last question, if we may.

[Operator]

Our next question is from the line of Ben Hunt from Investec.

[Benedict Anthony John Hernaman Hunt, Research Analyst]

Just 2 questions, 1 technical and 1 more broader. Firstly, just in terms of FX and how far you've managed to hedge forward, if possible, at what rates, given some of the FX moves? And then secondly, a more broader point is, obviously, you've had a lot of operational leverage this year and your gross margins are running well. What's your philosophy now as to where you run the business in terms of the EBITDA margin longer term? Would you -- are you sort of more willing to take that excess margin, put it back into price? Or are you more keen to keep that margin as it were?

[Alejandro Russo, CFO & Executive Director]

Alex, here. On the FX side, I think we're in a strong position. We are within policy, which will take us all the way, at least to the end of September next year. And we'll do it basically in line...

[Sundeep Arora, CEO & Executive Director]

[ Certainly this year. ]

[Alejandro Russo, CFO & Executive Director]

Correct, in line with, basically, commitments. So I think in terms of level, we're in a pretty good position. And we continue to overlay that as the commitments come in. So I think we're fairly comfortable that we have it in a good place ahead of next year. Thinking about the margin and cost structure for FY '22. Look, the price points at the moment continue to be incredibly competitive. It's something that gets reviewed on a fairly regular basis. But thinking about the structure of margins and costs heading into FY '22, I think the way to think about it is if you take, let's say, 0.5 point of the range guidance we have provided and you go back to FY '20, I think the way we're setting up the business is not only with very ambitious targets, but I suspect we will end up in a position, which is closer from a margin and cost structure to FY '21 exit than FY '20 a couple of years back. And that just gives you a bit of the position in between the 2 years where we are setting up the business.

[Sundeep Arora, CEO & Executive Director]

Very good. Thank you all for your time. And as I said before, Happy New Year to you all, and Alex and Jonny are available for any further questions on a one-to-one basis. Thanks a lot.

[Alejandro Russo, CFO & Executive Director]

Have a good day all.

[Sundeep Arora, CEO & Executive Director]

Cheers. Bye.

[Operator]

This now concludes today's call. Thank you all very much for joining. You may now disconnect your lines.