RS Group PLC

Good morning, everyone, and welcome to the RS Group's results for the year ended the 31st of March 2022. I'm David Egan. I'm the CFO of RS Group and I will be hosting the call today. Unfortunately, as we advised last night, Lindsley Ruth, our CEO, has contracted COVID and is unable to join us today. but we did receive a video from Lindsley overnight. And so we'd like to roll the tape.

Good morning. Hello, everyone. Welcome to RS Group and our 2022 preliminary results. It's been a great year with very strong outperformance of which I thank all of our people for their hard work efforts around the world. Unfortunately, I'm really sorry I can't join you in person today. but unfortunately I've been struck down with COVID. I was on a flight coming to London last week and there was somebody next to me that was really sick. And the last thing I'd want to do is to do that to somebody else. And if that didn't happen to my father, he'd probably still be here today. So I take it very seriously. For us as a company, we always put the health, wellbeing and safety of our people first. including all of our stakeholders. It's a top priority for us. So I'm staying home and doing the right thing. I've just unfortunately moved into a new home in London, a new flat, which should be exciting, although it appears to be in a mobile dead spot. I haven't been able to get Wi-Fi set up yet, as no one can come. And as you can imagine, not ideal for hosting a virtual presentation. So today I'm gonna leave the presentation to David, as I know he will do a great job explaining our results and opportunities. And as most of you heard at our investor event in March, I'm extremely excited about our journey to greatness. We have a great team. We're well positioned for the changing market. We are differentiated. And many of the levers to pull to drive stronger revenue and high quality profitable growth are defined by us and we're executing. There is so much more upside. So with that, I'm going to pass you to David. But first, I like to go unscripted. I just wanted to say in the slides and the presentation, you'll see Asia Pacific, all the regions did well. But in particular, Asia Pacific delivered double digit operating profit. And I remember three, four years ago, people saying, gosh, if you're losing so much money in Asia and we're losing more than 10% and you're in Asia, people said, why would you even do business there? I believed in our team, and I thought we could turn it around, and our team has turned it around, and I think there's more upside to come. As far as the big question of the day is, I think, what is our outlook on the market? I'll tell you, we can't predict the future, but I'll tell you, I couldn't be more proud of the people we have within this company, the culture that we're developing. I think it gives us a competitive advantage and I can assure you, all of our investors, that what you will see from us is a best effort in everything that we do. The shortages are starting to slow. So we're seeing less of those. Lead times are starting to come down again. They're still not where they used to be. So I think there'll still be some volatility in the market ahead. But for us, I think everything we have today is within our control. So with that, I'll turn you to David. I'm always available for anybody. And if anybody wants to visit me in a mask outside the door, I'd be more than willing to be with you. So have a great day. Bye for now.

Can we move the slides? Sorry. Thank you, Lindsay. We certainly wish you a speedy recovery and we're very sorry that you're not here with us today. As Lindsay said, the wellbeing and health of our people remains our number one priority. It really is very, very important. Welcome to our 2020 2021-2022 full year results presentation. We are extremely excited and delighted that our rebranding has begun and that our new corporate name, RS Group, is live. The rebranding reflects our strong RS brand, which is recognised by engineers around the world. We're bringing our businesses together under one strong, unified brand united behind our strong purpose of making amazing happen for a better world. As Lindsley said, we've had an outstanding year. Sorry. As Lindsley said, and as I am saying, we've had an outstanding year. Our revenue has grown by over a quarter. We've increased margins in all regions. We've generated strong free cash flow despite a significant inventory reinvestment. We've delivered 29% return on capital employed with a strong balance sheet that supports growth investment and capital return to our shareholders. We've proposed a final dividend of 11.6p. That's up 18%. giving a full year dividend of 18 pence. And we're making good progress on our 2030 ESG action plan for a better world. Our outperformance is seen in this chart, which shows our revenue growth versus nominal industrial production growth. And this is illustrating our market share gains and our resilience even during more difficult times. All this is being driven by our talented and skilled people who work hard, share our purpose and vision, and have fun despite all of the challenges. We've delivered and will continue to deliver a change in culture by investing in talent, empowering our leaders, and incentivizing our teams. And we talked a lot about that in our Investor Day recently. And we've demonstrated our ability to adapt to the significant external challenges that we have faced. We are controlling our own future through anticipating and adapting to the changes that are occurring around us. And we are incredibly proud of our people and all that they do for RS Group around the world. So let's go through the results for the year ended 31st of March 2022 and also the outlook as we see it today. In summary, we have delivered very strong revenue growth on a one and also a two year basis. On a one year basis, our adjusted operating margins grew by over three percentage points to 12.5%. Our adjusted operating profit conversion is over 28%. And our return on capital employed is nearly 29%. We have eight non-financial KPIs, which are detailed in the appendix of your packs. I've pulled out three that are linked directly to our £300 million sustainability loan. And as you can see, ESG is integrated throughout our group. Scope one and two carbon emissions decreased by 20% during the year. And 88% of our electricity is from renewable resources. Our packaging intensity fell by 16% from 2020 to 21 and 13% in the year just gone. And we were ranked in the top third of the FTSE 100 ranking 2021 women on boards and leadership So looking at the income statement, during the year our revenue grew by 28% to 2.5 billion pounds, and our adjusted PBT grew by 73% to 314 million pounds. Our adjusted effective tax rate grew one percentage point to 23%, reflecting the UK corporate income tax rate changes. Our revenue growth was due to increased order volumes, growth in the average order size due to more products in each basket, circa 7% price inflation over the course of the year, our 2020-21 acquisitions of Synovos, Needless and Liskim, and there was a £63 million headwind resulting from foreign exchange. As outlined previously, we are focusing on attention on higher margin customers, such as our key and corporate customers. They account for circa 10% of customer numbers, but roughly three quarters of our revenue, and so critical for our future successes. Our average order value increased by 10% to £211, helped by more product in our customers' baskets and our focus on higher value transactions. Our rolling 12-month net promoter score, which is a KPI for all employees, decreased to 50.6, mostly due to external product availability challenges. We're not happy with this score. However, our customer metrics and conversations suggest that we are outperforming our peers within the difficult markets with very strong product availability. Please note that going forward we will be slightly modifying our NPS measurement approach, and the details of this are included in the appendix of your pack. Our adjusted operating profit margin grew to 12.5%, largely driven by revenue through volume growth. Our gross margin increased 1.5 points to 44.2%, which included 60 basis point recovery from last year's PPE provisions, and a 1.1 percentage point benefit from better pricing and more detailed price management work. Operating costs were impacted by freight, labor, and energy inflation. Many of the cost pressures show no signs of abating and are not expected to unwind anytime soon. However, we are mitigating some of these pressures by re-engineering our transportation routes, increasing automation and seeing improving labour productivity. Our RISE program is nearing completion and delivered £15 million of benefit in the year. Our people have worked hard and driven our outperformance and so we awarded a real pay increase and a one-off thank you bonus during the year. Despite all of these cost challenges, our adjusted operating profit conversion margin grew over six percentage points to 28.4. Looking at the regions, all three regions delivered material improvements in adjusted operating profit. And they did this through volume growth, improved margins, operational efficiencies and leverage, and from being a more streamlined and agile business. This was despite some headwinds of limited inventory with OK Do, reduced trading at some of our major heavy industry customers within IESA, and lower revenue from existing customers and operational investments in Synovos. Ongoing investments in our operating model to strengthen our expertise, our technical capabilities, and product and service capacity. In EMEA, our operating profit margin was 15.4%, despite increased costs to serve after Brexit, and not yet fully leveraging the benefit of our DC expansion in Germany. In the Americas, the operating profit margin grew to 13.8%, driven by operational leverage from the much higher volumes. And then finally, Asia Pacific delivered a 11.5% operating profit margin this year, a function of focusing on more commercial and profitable opportunities. There's more details around each of the regions in the appendix of your packs. Moving on to cash, we remain a robust cash generative business with an adjusted operating cash flow conversion of 72%. This included an additional 100 million pounds of inventory as we mitigated some of the industry supply constraints that supported our growth. And we increased product within our newly expanded America's distribution center in Fort Worth, Texas. Our working capital to revenue ratio was at 21% and we continue to monitor our receivables collections very closely. Our capital expenditure was a little lower than last two years as we completed our US and German DC expansions. And we also held back on a couple of smaller projects as we modeled and prioritized the importance of those over the medium term. We expect CapEx to return to between 50 to 60 million pounds as we move into FY23. Given our strong cash generation and no acquisitions during the period, despite a lot of effort and a strong pipeline, our net debt fell to 42 million pounds. Our return on capital employed, which is an underpin of our incentive plans, increased by over nine percentage points to 28.7%. Turning to capital allocation. As I said before, we have a strong balance sheet and we target net debt to EBITDA around two times. We are prioritising investments into growth opportunities. Firstly, to drive stronger organic growth through ongoing investments into our operating model and our inventory positions. And secondly, through strategic acquisitions. With regards to acquisitions, we see many exciting opportunities to accelerate our organic growth As outlined at our March investor event, we know of over two billion pounds of EBITDA coming to the market over the next 18 months, which we believe, from an outside-in looking perspective, could fit our strategic aspirations. While our teams are very busy, we remain super disciplined on cultural, strategic, and financial criteria. We see the greatest opportunity in the Americas given a more liquid M&A market, but we also see significant opportunity in our solutions proposition across multiple countries around the world. Onto current trading. We've seen strong growth over the first seven weeks of FY23. Uncertainties remain, and we are mindful of the ongoing difficulties many are experiencing and the external headwinds our group could face. However, we have continued to invest in our operations and continue to develop our proposition. Meaning, we are well positioned to drive stronger revenue and high quality profitable growth to deliver significant sustainable value. So now let's recap a little bit on our journey to greatness and the progress that's being made and will be made over the next little while. As we said at the beginning, we're very pleased with the progress that we made in FY22. We have become a good company, but we're not satisfied because we want to be a great company. And we believe that we can generate significantly more value over the medium and long term. We outlined at our investor event, to be great, we need to benchmark our business versus the best. And we need to deliver best in class growth and returns within our core competitive strengths. We can do this by galvanizing a high performance, purpose-led culture. realizing a world-class customer experience, extending our wisdom, insight and data, and capitalizing on the amount of data that we have, accelerating to a solutions-led innovative business, and transforming our executional capabilities. These are all powered by systems, processes, technology, and brilliant people. We are planning, executing, and delivering this through a scorecard that covers three key areas, cultural transformation, operational efficiency, and our growth accelerators. And all of this drives stronger revenue and higher quality profitable growth. So let me just go through those briefly to give you a little bit more color. We are developing a purpose-led culture and hopefully you heard and saw and experienced firsthand that culture in action at the investor event in March. We put our people first. They are the most important asset and that they differentiate us from the competition. We've invested and continue to invest in our people. We have simplified our management structure and will continue to simplify our structure. And we are rewarding high performance. We have a retention rate of 90%. And we have seen our employee engagement scores continue to increase. And we believe that our purpose-driven culture is key in driving a strong ESG approach embedded into all that we do. We launched our 2030 ESG action plan for a better world in November 2021 and have updated investors twice over the last six months. It is fundamental to our purpose. A further update on our progress is in the appendix and there is a summary presentation and video from Andrea our VP of ESG and sustainability, on our website launched today. But we also see the opportunity from supporting all our stakeholders as they become more sustainable. For example, providing design tools for innovative engineers, monitoring energy usage, and offering products and services solutions to reduce carbon emissions. Developing predictive maintenance solutions re-engineering supply chains to reduce scope one, two and three emissions, and consolidating supply chains and deliveries through our integrated supply solution. We are well positioned to become a sustainability partner for all of our stakeholders. On the operational efficiency side, we are continuing to invest and drive a world-class execution and scalability. evidenced through the work that we've done. In Asia Pacific, turning the business around. Across the group, utilising our insight and data through group shared business services. And investing in our distribution centres to improve automation, efficiency, sustainability. Our experience and expertise has allowed us to identify supply chain issues in the market early, Hence the investments we made in inventory during the course of the year. Working closely with our suppliers to secure and invest appropriately in greater levels of inventory provided strength in availability and drove performance of the top line. You can see in the chart that incoming supply deliveries has seen a material reduction in performance. That is the black line. Whereas our availability, our on-time-to-promise, the red line, has dropped slightly. We are delivering industry-leading availability despite the significant and serious supply chain constraints across the world. Now onto the growth accelerators. And we have three of these, product choice, solutions, and being easy to do business with through an omnichannel. First, our differentiated product offer. We are a leading specialist distributor for industrial customers. Our data and insights shapes our product offer. We have a wide range, including many products with a low inventory turn that are critical in keeping businesses running. Our own brand, RS Pro, offers a value alternative. And many of our products deliver improved efficiency and lower carbon emissions. We're driving growth in total product numbers and new product development. Our second growth driver is solutions. We solve customers' problems and unlock new opportunities for our customers, suppliers, and RS group. Our product and services solutions many of which are innovative and digitally led, deliver efficiencies across the asset lifecycle. We are driving an increase in customer lifetime value through stronger partnerships which can generate additional and more sustainable revenue. Solutions now account for circa 23% of group revenue and is moving us from a more transactional side of distribution towards developing strategic relationships. And the key for us here is leading with solutions that then pull through products, and that drives additional value for our group. One of our highest value add solutions offer is our business process outsourcing business, IESA and Synovos, which will become RS integrated supply. We are the only integrated supply provider globally, and we have seen strong demand for our offer. We have won many new contracts over the last year, many in lighter industry sectors which are less cyclical, including two large global multinationals with combined pass-through of over £100 million. We're also expanding our work with existing customers as they roll out into their European locations. There is also additional value from offering integrated supply customers of IESA and Synovus, the RS range, RS Pro products, and we're also trialing an integrated supply light offer that we call RS Plus to our core RS customers. We're really excited about the opportunities, the demand, and the value that RS integrated supply brings to our group. And lastly, the third growth accelerator is being easy to do business with. We are truly omnichannel. Although over 95% of our new customer journey start online, customers want knowledge, experience, and expertise. They want to speak to someone that understands their business and knows what product or solution they may need, meaning that human interaction is key. 38% of our revenue is generated offline. And so providing that omnichannel, again, is a key differentiator and a growth driver for us. We are bringing and continue to bring a B2C experience to B2B customers by hiring digital specialists, improving website functionality, and using our insight to spend our marketing more wisely. Ultimately, this is driving improving returns. The building blocks of our strategy remain unchanged. But we see greater opportunity within our journey to greatness through growing volumes to increase the share of customers' wallet, driving better operational efficiency, improving our pricing and procurement capabilities, and developing our solutions offer. All outlined in our strategic plan to drive stronger revenue and high-quality profitable growth. However, the environment that we operate in today is uncertain with inflation, supply, and economic pressures. But we have a long history of resilience and believe that challenges can become opportunities. On inflation, we see the opportunity to drive margin benefits through utilizing detailed pricing tools, and using product elasticity models. On the cost side, we are reengineering our supply routes to offset some of the freight inflation. And our improving labour productivity is helping offset some of the labour pressures. We have shown over the last two years that our experience can help offset many of the global supply challenges. We are leveraging our supplier relationships, bringing forward supply orders, increasing safety stocks, offering alternatives where possible, and utilizing our global DC network to source, store, and deliver to our customers. The economic headwinds are unhelpful. However, we believe that we have a history of resilience, great people that can continue to drive out performance. So in summary, we are proud of what we have delivered to date. But as we said in March and we say today, we are not satisfied. We see plenty more to come on our journey to greatness. We have significant market share opportunity. We have a differentiated business model. but we can be great through focusing on our culture, customer experience, data and insight solutions, and by executing brilliantly. We have a purpose-driven culture and vision with ESG embedded in all that we do, and we will target acquisitions carefully under strict criteria to accelerate the organic growth agenda. Our journey to greatness will deliver stronger revenue and higher quality profitable growth. And with that, I'd like to invite you to ask your questions. I do have some members of our team in the audience, and so if I am not capable of answering the questions, I'm sure they will be. I think we'll start with questions in the room, and then we'll go for questions for people on the line.

to the Q1 of last year. I'm just wondering if you just touch on, I don't know if you're able to talk

Sure. So just on current trading, as we said in the statement, we've had for the first seven weeks of FY23, we've seen strong current trading across our three regions. Please bear in mind that our visibility remains very limited. We don't ordinarily have an order book. So we've seen good progress, good momentum coming off the back of Q4. We've seen a slight continuation uptick in terms of the price effect, but still very strong volume growth during the course of the first seven weeks. That is pretty consistent across the three regions. The only one that I would call out that's seen a slight moderation has been in Asia Pacific, and that's been largely due to the temporary disruptions that we've experienced with our distribution centre based in Shanghai, China. But otherwise, I think current trading for us, momentum continuing, and a good mix between price and volume growth.

Great. Thank you. The second question just relates to inventory. And I thought the charts were quite revealing now in terms of the continued sequential decline from a supplier delivery performance perspective, and clearly outperformed, supported by an inventory investment. How should we think about it going forward? Is this going to be another year of inventory investment?

So in terms of the metrics, we have seen from a supplier metrics, we certainly saw a deterioration during the course of the year. I think we're sort of starting to probably at the bottom of that. I wouldn't say it's materially improved, but at the same time, it hasn't ordinarily got particularly worse. From our on-time to promise, our promise to the customer, Again, we saw a deterioration of that metric during the course of the year. We've seen some early bright shoots in the course of March and April where we're starting to turn the corner. So we're still in the 80s, the high 80s in terms of OTTP, and we certainly want to see that well into the 90s over time. In terms of inventory investment for FY23, it won't be at the same level of 100 million, but we certainly are putting more inventory into the business, which is probably less than 100 but more than 50.

Thanks. And then the final question just relates to integrated supply. One would imagine this is the perfect environment to sell the integrated supply solutions that you have, given the cost pressures that are sort of prevalent Can you just talk about how the inquiry pipeline is developing for Synergus and ISA respectively?

Sure. So both businesses have a strong pipeline. The time that it takes from inquiry to signing and then execution implementation is long. Our objective is to try and shorten that pipeline as best we can. But both businesses have very strong pipelines. Both businesses have seen customer wins during the course of the year, some smaller but also some larger. Our key focus now is to bring the two businesses together under the RS integrated supply brand with common platforms, common process and an integrated leadership team.

Good morning. Sanjeev Diathi at Liberum. Just one question for me. It's good to see the operating margins by region, the gap between them starting to narrow. Just wanting to understand a little bit about, say, I think historically the North America gross margin has been lower. If that is changing and if that is part of the reason for the margin improvement, or is it just about operating leverage? I guess just trying to understand longer term, can we see, say, North America get to a similar level to EMEA?

Why don't I, I'll say a couple of words and I'll hand it over to Mike England, our COO. So the margin in the Americas is lower. It's typically in the 30s, whereas the gross margin sits in the 40s. If you look at the operating margin, the Americas has always had a very strong operating margin, so it's had a lower cost to serve. Now typically that's because they operate with higher order values. and they can operate with a lower cost to serve in which to deliver that. We would say that, you know, our objective is to improve the gross margin. There has been improvement in the gross margin, and that has driven an improvement in the operating margin. But maybe, Mike, you can just cover sort of what are the three or four things that will move it forward further.

So over and above actions that we're taking around dealing with inflation on price, but also better controls around discounting that David talked to. There's two areas that I would really call out. The first is product mix, and the second is customer mix. And both are interlinked. On product mix... Sorry, I'm being told to stand up. I'll just stand up. So on product mix, as we discussed at the Investor Day, our America's business is operated in a more narrow product sphere, more around automation and control and the upper end of electronics and interconnect electromechanical. Our objective is to expand the product range more into the maintenance, repair and operations space. This year we've increased our product portfolio quite significantly and can continue to do so. That with it attracts a higher margin opportunity. Equally, we are still not at the momentum that we would like around our own brand and RS Pro. Lots of really good work happening. But again, that's all part of that margin accretive product range expansion activity that we're driving. On the customer mix, we can see a slightly different shape in terms of digital share within the Americas. So typically now we're up to around 40% of our share is digital. is through digital channel, 6% offline. We've seen an enormous acceleration of our digital channel, particularly the website within the Americas, which is very encouraging for us. That means that we're attracting a much broader sphere of customers, Typically, we've operated more at the upper end of the customers. Around the larger customers, we're actually attracting also a broader range of smaller customers. And as the product range expands and our digital experience continues to improve, which we're making investments around, then those combinations of those two, we believe, will improve our margin but also accelerate our revenue growth as well.

Thank you. Thank you. Hi, good morning. Sylvia Barker from JP Morgan. Three quick questions from me as well, please. Firstly, on CapEx, could you just talk about how much of the 50 to 60 is DC related? How much might be IT as well? Secondly, on the basket size increasing, could you share any details on which regions and or customer areas? types drove that and where you see that going forward. And then finally, on the NPS score, was the reduction driven by B2C or was it on the B2B side? Thank you.

Great, thank you. So on the CapEx score, During the course of FY22, there was a portion of CAPEX was DC related, predominantly going into Germany. The balance was keep the lights on and technology related CAPEX. As we look forward, the bias will be more focused on systems and process and keeping the lights on investments. less on the distribution expansions. There'll be more on the automation going into the distribution centres, not necessarily on expansion programs. With regards to the basket size, The overall average order value now is £211. We have seen that improve across the three regions relatively consistently. There is no magic number in terms of what should it be, what could it be, but ultimately we want to give the customer a brilliant experience and the more product and solutions they put in their basket, then we would see that that also then drives margin opportunity because it then creates a lower cost to serve those customers. And then with regards to NPS, NPS was driven largely by external factors and it really came down to product or a lack of product availability, not meeting customers' expectations. Despite us having very strong availability versus the competition, we didn't meet the customers' expectations and hence we have seen a deterioration of our NPS score during the course of the year. We have seen finally a couple of bright shoots. I won't say bright, maybe sort of emerging shoots, certainly not dark clouds or moon, but it's moving in the right direction in the course of both the month of March and April, but it's early days. Any more questions in the room? Are there any questions on the phone?

I will give instructions of how to register questions on the telephone. So if you would like to ask a question, please press star followed by one on your telephone keypad. We have a question on the telephone from Rory McKenzie from UBS. Rory, please go ahead.

Good morning, all. It's Rory from UBS here. Just to say I'm not being too lazy to walk upstairs in UBS. I'm actually working from home in solidarity with Lindley. Firstly, on the cyclical risks, you've said you're seeing strong growth overall despite the Shanghai lockdown. But are there any customer segments or product segments where you are seeing activity slow? And maybe just talk through which indicators you're watching, I presume, very carefully at the moment. Then secondly, on the market share gains, can you break down the 19% volume mix growth in the past year in terms of customer numbers and wallet share gain, I guess, for the remainder within those customers? And at the investor day, you talked a lot about kind of upselling lots of the kind of key accounts and explain those relationships. Just keen to hear how those are progressing and your thoughts for this year and this environment. Thank you.

Thanks, Rory. So I'll take the first two. Mike, if you can take the third one on the upselling. So in terms of the outlook, As we said in the statement, for the first seven weeks, the growth has remained strong. We have seen a slight tick up with regards to the price effect within those growth numbers, but still delivering very strong volume growth. We haven't seen any sort of material differentiation across the countries. There's always going to be ups and downs in the different end markets that our countries are focused on. But overall, at this point in time, we're cautiously optimistic in terms of what we're seeing and how we're performing in those markets, and believe that we are continuing to differentiate ourself and our performance. What are we watching? I think we're watching as much as we possibly can. Talking to customers, talking to suppliers quite a lot. We're also looking at various metrics within the markets. But overall, I think we're cautiously optimistic in terms of what we see. But I think also we have agility within our model. So if we do start to see things that are going a little bit off piste, then we will take action and be as agile and nimble as we possibly can to ensure that we keep pointing in the right direction and drive future value. In terms of the market share, I guess our market share has been split. We delivered 26%. Around 6%, 7% of that was price. The balance, 19%, was a mix of volume and mix. And it was more biased towards volume than mix. And again, that was pretty consistent across the regions, a little bit more biased or stronger volume coming out of the Americas. But overall, I think at the group level, strong volume growth, then price, then mix.

Mike? Yeah, just on the notion of upselling, just five, I guess, key areas that I'll just ask you to consider as we look ahead. And what I would say, just on current trading, we continue to see the average order value strengthen, which is very positive, which means we're ultimately continuing to drive more upselling to our existing customers and also attracting new customers. Those five areas, a lot of focus around the world on customer lifetime value. So putting programs in place that really looks and helps our sales and marketing teams to be focusing much more on quality over quantity. And that's a really important factor for us as we're focusing and resetting the business around industrial B2B customers. Whilst we are very pleased to have a B2C channel, our primary focus is on B2B. With that, as we look ahead also, we're doing a lot of work around our customer master data. When I was at the investor day talking about how we realize a world-class customer experience, it really does start with the forensic understanding of our customers. I think we're now more into the insight and wisdom than ever before. We're doing a lot of resetting as it relates to the way in which we classify our customers across corporate key and standard. Just one example, we have resellers today sitting within corporate customers. So we're doing a lot of interrogation around our data around the world. We're also aligning our customer master data And as I also talked about, we've done a lot of work around customer personas and defining in detail the customer personas that we believe are going to add profitable growth for us. And so that customer master data work is important. The user experience improvements within our web experience and also digital procurement, so how we continue to strengthen our e-procurement offerings to our customers, we believe that that continues to drive and will continue to drive upselling opportunities. With that and with the improvements of customer master data over time, that also allows us to move towards being much more personalized for our customers and much more relevant. So we're putting in their hands the products and solutions that they want at point of inquiry or point of purchase. Then we've got range expansion and continuously to continue to home in. Our product range expansion plans relevant to those customers around a stock to non-stock capability, which we believe is going to continue to drive growth. The fifth area, as David called out, is moving from a transactional relationship with our customers to a value-based relationship with our customers. So not only selling them products, But combining the strength of products with solutions, with the overall customer experience, those three elements combined through solutions gives us an upsell opportunity. So we believe that we're on the journey. As David will say, and Lindsley continues to call out, we're good today. But the opportunity for growth and profitable growth, we believe, is continuing to be extraordinary in a very fragmented market.

Thanks, Mike. And Rory, just quickly on your customer number piece of the question, we're focused very much on the value that we drive from the customer, not necessarily the absolute customer numbers. So we have seen an improving customer number position, but equally we're looking to drive more value from the customers in which we serve. So it's more around the quality of the customer, not necessarily the absolute customer number.

Okay. Very helpful. Thank you.

Any other questions?

We have no further questions on the telephone line.

Are there any questions that have come through the web?

There are. They're very similar, actually. How quickly can you pull back costs if or when things turn down? And how quickly can you unwind the supply orders?

Right. So I'll talk costs. Debbie Lentz will talk supply. So costs. We have multiple areas of cost that run through our business. Some of those are easier to stop or remove or contract than others. But we have sort of action plans or plans A, plans B and plan C. But certainly, as Lindsay says many times, When you're in more troubled times, it's also, that's a time to look to try and invest. You can attract some great talent that becomes available, and it's also an opportunity to make sure that your best position when the world then begins to move out of challenging times into good times. So for us, we're very mindful of making sure that we continue to drive in improving operating margin, but at the same time, we also have a medium to long-term vision here that we can drive, you know, very good value by investing appropriately, but at the same time, if we need to take some actions, we'll take actions, and those actions can happen very, very promptly. Debbie?

From a supply perspective, we'll continue to be in pretty good shape. So as we were growing and as we had supply disruption, we did a very good job in protecting ourselves and bringing in the right inventory, reading the market, and getting in front of it. If it comes down, it's the same thing. We stay in front of it. We read the market. We work with our folks in the markets to tell us what's happening. With the great relationships we have with our suppliers, most of them, we can adjust our order books, adjust our agreements, and those sort of things. So we've got some great intelligence that enables us to flex up or down pretty dynamically.

Let me see. Any more? Okay, I think that is it. So again, on behalf of Lindsley and myself, I'd like to thank you for your attendance. Thank you for those in the room and thank you for those on the line. Lindsley and I look forward to speaking and seeing you over the course of the next few weeks. And as I said at the beginning, we wish Lindsley a speedy recovery and I'm sure I can assure you he's on good form and we're waiting and with bated breath for his return. Thank you and good morning.