Full Year 2021 Micro Focus International PLC Earnings Call
Speaker 1: SaaS and subscription solutions in every portfolio improves our competitiveness and our ability to capture more of the market opportunity.
<unk> solutions in every portfolio improves our competitiveness and our ability to capture more of the market opportunity.
We now have a global go to market organization, delivering greater consistency in both performance and customer service.
Speaker 1: We now have a global go-to-market organization delivering greater consistency in both performance and customer service.
Speaker 1: The combination of these actions provides a platform for continued improvement and the delivery of the objectives we set out on our strategy day.
The combination of these actions provides a platform for continued improvement and the delivery of the objectives, we set out on our strategy day.
Speaker 1: Overall, we're pleased with the progress made in terms of revenue performance.
Overall, we're pleased with the progress made in terms of revenue performance.
Speaker 1: licensed revenue draw overall and in four of our five portfolios.
License revenue grew overall and in four of our five portfolios.
Speaker 1: We saw continued development and progress in our staff offerings.
We saw continued development and progress in our SaaS offerings.
Speaker 1: and have significant work both completed and ongoing to improve our performance and maintenance. In Q1 of FY22, we've continued to make good progress.
And have significant work, both completed and ongoing to improve our performance and maintenance in Q1 of FY 'twenty. Two we continued to make good progress.
Speaker 1: we announced and have completed the disposal of Digital Safe.
We announced and have completed the disposal of digital safe.
Speaker 1: The financial outcome achieved demonstrates the value inherent in our portfolio and our willingness and increasing ability to realize this value where and when appropriate. We closed our third financial period on the new systems smoothly and to plan.
The financial outcome achieved demonstrates the value inherent in our portfolio and our willingness and the increasing ability to realize this value where and when appropriate.
We closed our third financial period on the new systems smoothly and to plant.
Speaker 1: We also identified and acted upon additional opportunities to remove duplicate costs and inefficiencies.
We also identified and acted upon additional opportunities to remove duplicate costs and inefficiencies.
Speaker 1: Our strategic partnership with AWS achieved another key milestone with the launch at their flagship re-invent conference of the AWS mainframe modernization preview solution of which we are a-
Our strategic partnership with AWS achieved another key milestone with the launch at their flagship reinvent conference of the AWS mainframe modernization previews solution.
Of which we are a core element.
Speaker 1: were supporting AWS in building a pipeline of customers that want to move to this offering, have begun generating consulting revenues with subscription revenues to follow later this year and ramping thereafter as per the plan.
We're supporting AWS in building a pipeline of customers that want to move to this offering.
Begun generating consulting revenues with subscription revenues to follow later this year and ramping thereafter.
The plan.
Speaker 1: We're on track and 100% focused on delivering our aspirations as to how we exit FY23, where our goals remain. Flatter better revenue trajectory.
We're on track and 100% focused on delivering our aspirations as to how do we exit FY 'twenty, three where our goals remain flat to a better revenue trajectory.
4% to $500 million of gross cost reduction.
Speaker 1: $400 to $500 million of gross cost reduction and an exit run rate of $500 million of free cash.
And an exit run rate of $500 million of free cash flow.
Speaker 1: I will now turn the session over to Matt to cover our financial performance in FY21 in more detail before returning to cover our priorities for the immediate future. Thanks, Stephen.
I will now turn the session over to Matt to cover our financial performance in FY 'twenty, one in more detail before returning to cover our priorities for the immediate future.
Thanks, Steven good afternoon, and good morning, everyone.
Speaker 1: Firstly, on delighted to say our audited results are consistent with those we presented in November .
Firstly on delighted to say our audited results are consistent with those we presented in November the.
Speaker 2: The key financials are revenue of 2.9 billion, representing a halving in the rate of overall decline.
The key financials are revenue of $2 9 billion, representing a hauling and the rate of overall decline adjusted.
Speaker 2: Adjusted EBITDA of 1 billion within this cost discipline was good with overall costs reducing while we continue to invest in both people and products. Adjusted free cash of $300 million. One of the strengths of our company is our ability to generate strong levels of free cash.
Adjusted EBITDA of 1 billion within this cost discipline was good with overall cost reducing whilst we continue to invest in both people and products adjusted free cash of $300 million one.
One of the strengths of our company is our ability to generate strong levels of free cash flow performance in 'twenty. One was impacted by a number of one off items, which I will cover later the important thing is these were one off and we have confidence free cash flow will build from here on we certainly have not been sitting on our hands. Since November we have been busy taking cost out.
Speaker 2: Performance in 2021 was impacted by a number of one-off items, which I will cover later. The important thing is these were one-off, and we have confidence free cash flow will build from here on. We certainly have not been sitting on our hands since November . We have been busy taking costs out of the business and remain on track to deliver the cost savings we described at the strategy.
The business, we remain on track to deliver the cost savings. We described at the strategy day.
Speaker 2: We have completed the sale of Digital Safe. We've received the cash and are using it to pay down our debt.
We have completed the sale of digital safe, we've received the cash and are using it to pay down all debt just.
Speaker 2: Just to remind you, we sold DigitalSafe for $375 million, equivalent to approximately 3.5x revenue and 12.5x adjusted EBITDA.
Just to remind you we sold digital safe for $375 million equivalent to approximately three and a half times revenue and 12 and a half times adjusted EBITDA less lease costs.
Speaker 2: In total, we transferred $40 million of lease obligations as part of the transaction.
In total we transferred $40 million of lease obligations as part of the transaction.
Speaker 2: We also took the benefit of the buoyant loan market and refinanced $1.6bn of debt.
We also took the benefit of the boy and loan market and refinanced $1 $6 billion of debt.
Speaker 2: Finally, we are proposing a final dividend of 20.3 cents. So let's look at our overall financial performance.
Finally, we are proposing a final dividend of <unk> 23 cents. So let's look at our overall financial performance Regeneron.
Speaker 2: We generated revenues of $2.9 billion in 21. This represents a halving of the rate of constant currency decline from 10% reported in 20 to approximately 5% in 21.
We generated revenues of $2 $9 billion in 'twenty. One this represents a halving of the rate of constant currency decline from 10% reported and 20, so approximately 5% and 21 hour.
Speaker 2: I will expand on our revenue performance by stream and product group shortly.
I will expand on our revenue performance by stream and product group shortly.
Speaker 2: Alongside the improved revenue trajectory, our cost base reduced by 0.9% on the net basis. In terms of the cost base, we have essentially used cost savings achieved in the year, totaling approximately $120 million, to fund the run rate impacts of investments made in cyber res, big data, and other parts of the portfolio.
Alongside the improved revenue trajectory, our cost base reduced by <unk>, 9% on a net basis in terms of the cost base. We have essentially used cost savings achieved in the year totaling approximately $120 million.
To fund the run rate impacts of investments made in cyber risk big data and other parts of the portfolio.
Speaker 2: A combination of revenue and cost actions delivered an adjusted EBITDA performance of $1 billion and $40 million, which represents an adjusted EBITDA margin of 36%.
The combination of revenue and cost actions delivered an adjusted EBITDA performance of $1 billion $40 million, which.
<unk> and adjusted EBITDA margin of 36%.
Speaker 2: You will remember from our strategy day, we have set ourselves an ambitious but achievable target. Over the next two years, we've removing $300 million of recurring costs on a net basis. From 1.9 billion seen on this page, to 1.6 billion as we exit fiscal 23.
You will remember from our strategy day, we have set ourselves an ambitious but achievable target over the next two years of removing $300 million of recurring costs on a net basis.
From $1 9 billion seen on this page to $1 6 billion as we exit fiscal 'twenty three.
Speaker 2: This reduction is after assuming a 5% inflation we cost in both fiscal 22 and 23. IE, we have to save around $500 million gross to save $300 million net.
This reduction is after assuming a 5% inflationary cost in both fiscal 'twenty, two and 'twenty three.
I E. We have to save around $500 million gross to save $300 million net.
Speaker 2: Clearly inflation is a hot topic at the moment, particularly in the labour market, but we believe the parameters we have set ourselves are achievable.
Clearly inflation is a hot topic at the moment, particularly in the labor market, but we believe the parameters we have set ourselves are achievable.
Speaker 2: As we progress with the cost programme, we will give detail of the savings we have achieved, but for commercial reasons, which I am sure you understand, we have not disclosed our internal costs.
As we progress with the cost program, we will give detail of the savings we have achieved but for commercial reasons, which I'm sure you understand we have not disclosed our internal targets.
Speaker 2: Exceptional spend in the period totaled $247 million. Last year it was $3 billion, which included an impairment charge of 2.8 billion in relation to the group's goodwill.
Exceptional spend in the period totaled $247 million last year. It was $3 billion, which included an impairment charge of $2 8 billion in relation to the group's goodwill.
Speaker 2: Finally, we are proposing a final dividend of 20.3 cents, taking our total dividend for the year to 29.1 cents, consistent with our five times covered policy. Revenue.
Finally, we are proposing a final dividend of <unk> 23 cents, taking our total dividend for the year to 29.1 sense consistent with our five times covered policy revenue.
Speaker 2: On this slide you will see revenue performance both by stream and product.
On this slide you will see revenue performance, both by stream and product group. We are pleased to return to growth in license with revenue growing by approximately 5% in the period clearly an initial step but significant and encouraging.
Speaker 2: We are pleased to return to growth in licence with revenue growing by approximately 5% in the period. Clearly an initial step but significant and encourages.
Speaker 2: Sales execution was strong. In both halves and with key metrics, such as sales conversion rates, remaining a bit of previous periods, with improvements being broad-based across the portfolio.
Sales execution was strong in both halves and with key metrics such as sales conversion rates remaining above previous periods with improvements being broad based across the portfolio.
Speaker 2: Maintenance revenue declined by 9%. This was below our expectations on what we believe is attainable. Improvement here remains a critical priority for the company. We have been consistent in our view that this will take multiple periods to deliver.
Maintenance revenue declined by 9% this was below our expectations and what we believe is attainable improvement here remains a critical priority for the company we've been consistent in our view that this will take multiple periods to deliver.
Speaker 2: Fast revenue declined by 4%, but with an improving underlying trajectory.
SaaS revenue declined by 4%, but with an improving underlying trajectory exclude.
Speaker 2: Excluding digital safe, SaaS revenues grew by 0.2% year on year and growth is expected to accelerate over the next few reporting periods. Amour work in reshaping our consulting practice is now complete and this part of our business is now well positioned to deliver the type of projects which add value to customers through supporting faster, more effective deployment of our software. Now turning to product group performance. AMC
Excluding digital safe SAS revenues grew by <unk>, 2% year on year and growth is expected to accelerate over the next few reporting periods.
Work in reshaping our consulting practice is now complete and this part of our business is now well positioned to deliver the type of projects, which add value to customers through supporting faster more effective deployment of our software.
Now turning to product group performance a.
AMC.
We had a strong close to the year delivering growth overall.
Speaker 2: AMC is typically cyclical in nature and this trend is expected to continue until we begin to see revenue from the AWS partnership which remains on track for 23 and beyond.
AMC is typically cyclical in nature and this trend is expected to continue until we begin to see revenue from the AWS partnership which remains on track for 'twenty, three and beyond cyber risk.
Speaker 2: In aggregate, we are really pleased with the progress made in the period. Three of the four sub portfolios here delivered performance in line or ahead of our expectation.
In aggregate, we are really pleased with the progress made in the period three of the four sub portfolios here delivered performance in line or ahead of our expectations.
Speaker 2: There remains one sub-portfolio, which is providing a headwind, particularly in terms of maintenance performance, and we are executing a comprehensive plan to actively improve this.
There remains one sub portfolio, which is providing a headwind, particularly in terms of maintenance performance. We are executing a comprehensive plan to actively improve this.
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Speaker 2: The big news here is obviously the disposal of DigitalSafe, which we have already discussed. Excluding DigitalSafe, IMNG declined 2.5%. The remainder of the portfolio performed as we expected.
The Big news here is obviously the disposal of digital safe, which we have already discussed excluding digital safe Aiman G declined two and a half per cent.
The remainder of the portfolio performed as we expected in.
Speaker 2: In big data, we see significant market opportunity here and expect growth to accelerate. In ADM, we made substantial progress with the product's offerings. Improving maintenance performance and growth in SAS are the key.
In Big data, we see significant market opportunity here and expect growth to accelerate.
In ADM, we made substantial progress with the products' offerings, improving maintenance performance and growth in SaaS are the key priorities.
At home.
Speaker 2: Encouragingly, full-year performance or a moderation in the rate of license revenue decline with several support furloughs growing, we continue to work to improve maintenance performance.
Encouragingly full year performance saw a moderation in the rate of license revenue decline with several sub portfolio is growing we continue to work to improve maintenance performance in.
Speaker 2: In the summary, our goal of exiting 23 with flat or better revenue is on track.
In summary, our goal of exiting 'twenty, three with flat or better revenue is on track.
Exceptional items.
Speaker 2: We recorded a total of $247 million of exceptional items.
We recorded a total of $247 million of exceptional items in 'twenty one.
Speaker 2: This compares to $3 billion in the previous period, which included a 2.8 billion goodwill impairment charge. In the year, the key charges in relation to exceptional spend were $136 million in respects of microfocus and HPE integration charges.
This compares to $3 billion in the previous period, which included a $2 8 billion goodwill impairment charge in the year. The key charges in relation to exceptional spend were $136 million and respects of micro focus and HPE integration charges. The majority of this relates to the implementation of the enterprise one.
Speaker 2: Majority of this relates to the implementation of the enterprise-wide platform. As I stated at the strategy day, it is our intention that we will incur no further exceptional spend in relation to this platform with any future costs recorded within normalised operating.
I'd platform as I stated at the strategy day. It is our intention that we will incur no further exceptional spend in relation to this platform with any future costs recorded within normalized operating costs.
Speaker 2: In addition, we also incurred $75 million in relation to the settlement of the WAP legal claim.
In addition, we also incurred $75 million in relation to the settlement of the Wap legal claim.
Speaker 2: Going forward, I'm keen that exceptional spend is only recorded in relation to incremental M&A and cost reduction programs. Excluding further M&A, 22 and 23 exceptional costs are expected to be approximately $100 million in each year and relate to the cost of delivering the cost savings I outlined earlier. At the bottom of the slide, you will see the cash cost of exceptional spend in 21 after the impact of tax.
Going forward on gain that exceptional spend is only recorded in relation to incremental M&A and cost reduction programs. Excluding further M&A 'twenty, two and 'twenty three exceptional costs are expected to be approximately $100 million in each year and relate to the cost of delivering the cost savings I outlined earlier.
At the bottom of the slide you will see the cash cost of exceptional spend in 'twenty one after the impacts of tax the.
Speaker 2: The cash cost of exceptional spend in total was $236 million in the period.
The cash cost of exceptional spend in total was $236 million in the period in the next slides I will present the impact. This has had on our free cash flow.
Speaker 2: In the next slides, I will present the impact this has had on our free cash.
Speaker 2: Now this is my favourite slide. Not only does it reconcile EBITDA to free cash flow, but it allows you to see how our position improves next year. It is all about the cash. Microfocus is a high
Now this is my favorite slide not only does it reconcile EBITDA to free cash flow, but it allows you to see how our position improves next year it.
It is all about the cash.
Okra focus is a highly cash generative business in 'twenty, one our ability to generate free cash flow was impacted by three material items, one working capital to tax and three exceptional spend.
Speaker 2: In 21, our ability to generate free cash flow was impacted by three material items.
Speaker 2: One, working capital. Two, tax. And three, exceptional spend.
Turning to working capital.
Speaker 2: In 21, we had a cash outflow of $127 million. This was essentially the net of two movements, an outflow of receivables and an inflow on payup.
In 'twenty, one we had a cash outflow of $127 million. This is essentially the net of two movements and outflow receivables and an inflow on payables, we had a material improvement in Q4 billings year on year. This improvement is clearly a positive trend and resulted from the growth in new license sales specifically.
Speaker 2: we had a material improvement in Q4 Billings year-on-year. This improvement is clearly a positive trend and resulted from the growth in new licence sales. Specifically, our Q4 21 Billing was approximately 15% higher year-on-year, which increased revenue recognised, but with the cash following later.
Our Q4, 'twenty, one billing was approximately 15% higher year on year, which increased revenue recognized but with the cash following later.
Speaker 2: Overall, our adjusted cash conversion dropped from 113% in 20 to 87% in 21. You can see with this percentage that average for the two years is approximately 100%, which is more consistent with our typical guidance range of 95 to 100%. Next year, we expect cash conversion to be within this range, which would result in an improvement of circa $100 million year on year.
Overall, our adjusted cash conversion dropped from 113% and 22, 87% in 'twenty one.
You can see with this percentage the average for the two years is approximately 100%, which is more consistent with our typical guidance range of 95% to 100%.
Next year, we expect cash conversion to be within this range, which would result in an improvement of circa $100 million year on year.
Tax.
Speaker 2: In 21, we made tax payments of $270 million, which compares to $150 million in 20.
In 'twenty, one we made tax payments of $270 million, which compares to $150 million in 'twenty and.
Speaker 2: In 2021, we made large payments which are not expected to recur. Firstly, a $47 million payment in relation to EU state aid. We disclose this to you at the half year. We made this payment while appealing this ruling in court alongside several other FTSE companies. Our current expectation remains this amount will be repaid in the near future and have recognised the receivable accordingly.
In 'twenty, one we made large payments, which are not expected to recur firstly, a $47 million payment in relation to EU state aid we disclose this to you at the half year. We made this payment while appealing this ruling in court alongside several other FTSE companies. Our current expectation remains this amount will be repaid in the.
Near future and have recognized the receivable accordingly.
Speaker 2: Secondly, in 20 we made catch-up payments of $52 million to certain tax jurisdictions following the filing of aged accounts. I would categorise these payments as the final pieces of the integration clean-up. Going forwards, the group expects a cash tax rate of approximately 30%, which will be a significant reduction year-on-year and see cash tax payments reduce to circa $130 million.
Secondly in 'twenty, we made catch up payments of $52 million to certain tax jurisdictions. Following the filing of aged accounts I would categorize these payments as the final pieces of the integration cleanup going forwards. The group expects a cash tax rate of approximately 30%, which will be a significant reduction.
Year on year, and see cash tax payments reduce to circa $130 million.
Speaker 2: Looking at Exceptional Items, Exceptional Spend continues to reduce free cash flow.
Looking at his exceptional items exceptional spend continues to reduce free cash flow.
Speaker 2: In 21, we charged $247 million to the income statement in relation to exceptional items.
In 'twenty, one which are $247 million to the income statement in relation to exceptional items.
Speaker 2: The total cash cost of this spend was $236 million, which after tax is an outflow of $189 million.
The total cash cost of this spend was $236 million, which after tax is an outflow of $189 million.
Speaker 2: Going forwards, excluding any M&A, exceptional costs are expected to be $100 million per annum for 2022 and 2023. In addition, there is approximately $45 million of exceptional spend on the balance sheet at October 2021. However, the cash impact of this spend is factored into our Adjusted Cash Conversion Guidance outlined on the previous slide. Again, year on year, this represents an incremental improvement in free cash flow.
Going forward, excluding any M&A exceptional costs are expected to be $100 million per annum for 'twenty two and 23. In addition, there is approximately $45 million of exceptional spend on the balance sheet at October 2021, However, the cash impact of this spend is factored into our adjusted.
Cash conversion guidance outlined on the previous slide.
Again year on year. This represents an incremental improvement in free cash flow.
Speaker 2: So in summary, for 2022, we are expecting flat working capital, cash tax closer to 2020 levels, circa $130 million, reduced exceptional spend of circa $100 million, excluding M&A.
So in summary for 2022, we are expecting flat working capital cash tax closer to 2020 levels circa 130 million reduced exceptional spend of circa $100 million excluding M&A.
Speaker 2: Before I leave this slide, I would also like to touch on CapEx and finance.
Before I leave this slide I would also like to touch on Capex and finance leases in 2021, we invested $145 million in Capex in 2022, we expect this to increase by $60 million as we invest $40 million in software and product development and $20 million in our it infrastructure.
Speaker 2: In 2021, we invested $145 million in CAPEX. In 2022, we expect this to increase by $60 million as we invest $40 million in software and product development and $20 million in our IT infrastructure.
Gearing and net debt.
Speaker 2: The group's net debt to adjusted EBITDA ratio was four times at the end of October . We have since completed the disposal of Digital Safe. In total, including finance leases, this disposal is expected to reduce our net debt by $375 million.
The group's net debt to adjusted EBITDA ratio was four times at the end of October we have since completed the disposal of digital safe in total, including finance leases. This disposal is expected to reduce our net debt by $375 million on.
Speaker 2: On a pro-forma basis, the group's leverage ratio was 3.8 times adjusting for this disposal.
On a pro forma basis, the group's leverage ratio was three eight times adjusting for this disposal.
Speaker 2: In January , we announced the £1.6bn partial refinancing of our term loans and in doing so increased the average maturity of the group's debt by a year. Our approach to this refinancing was to alter our capital structure, splitting the £3.3bn term loan with the intention of creating smaller tranches of debt that we will refinance on a smoother path.
In January we announced the $1 6 billion partial refinancing of our term loans and in doing so increase the average maturity of the group's debt by year. Our approach to this refinancing was to alter our capital structure splitting the $3 3 billion term loan with the intention of creating smaller tranches of debt that we will refinance.
On a smoother path.
Speaker 2: The reduction in leverage over the medium-term remains a key priority of the Group and our ambition is to reduce our gearing to three times. I would like to finish with reiterating our final
The reduction in leverage over the medium term remains a key priority of the group and our ambition is to reduce our gearing to three times.
I would like to finish with reiterating our financial guidance.
Revenue.
Speaker 2: We are on track to exit 23 with flat or better revenue. There are no changes to the assumptions made in regard to 22. Again, we reiterate that progress is not expected to be linear.
We are on track to exit twenty-three with flat or better revenue. There are no changes to the assumptions made in regard to 22 again, we reiterate the progress is not expected to be linear.
Costs.
Speaker 2: On track to exit 2023 with a circa $300 million reduction in the cost base net of inflation.
On track to exit 2023, with a circa $300 million reduction in the cost base net of inflation.
Speaker 2: On exceptionals, excluding M&A, we expect to spend approximately $200 million evenly over the next two years. For 2022, we expect our adjusted cash conversion to return to more normalised levels. The business has historically delivered an adjusted cash conversion of between 95 to 100%, and this is expected again next year.
On Exceptionals, excluding M&A, we expect to spend approximately $200 million evenly over the next two years for 'twenty. Two we expect our adjusted cash conversion to return to more normalized levels. The business has historically delivered an adjusted cash conversion of between 95% to 100% initially expected again.
Next year.
Speaker 2: Staying on cash, we expect capex including finance leases to be around $200 million.
Staying on cash, we expect capex, including finance leases to be around $200 million.
Speaker 2: cash interest cost of $230 million, including the upfront fees of the refinancing and cash tax of approximately $130 million. The digital safe disposal has resulted in net proceeds of $335 million after tax and fees, as well as a reduction in finance obligations of approximately $40 million, together a reduction in net debt of $375 million.
Cash interest cost of $230 million, including the upfront fees of the refinancing and cash tax of approximately $130 million. The digital safe disposal has resulted in net proceeds of $335 million after tax and fees as well as a reduction in finance obligations of approximately 40.
Together, our reduction in net debt of $375 million digital safe will have contributed approximately $25 million of revenue and $13 million of adjusted EBITDA in the first quarter. Finally, our employee benefit trust is in the process of purchasing 12 million share.
Speaker 2: Digital Safe will have contributed approximately $25 million of revenue and $13 million of adjusted EBITDA in the first quarter.
Speaker 2: Finally, our Employee Benefit Trust is in the process of purchasing 12 million shares for the purposes of Employee Share Scaling.
As for the purposes of employee share schemes.
Speaker 2: D-Shares will be used to settle current and future LTG grants for those employees considered critical to delivering our objectives. Over
These shares will be used to settle current and future LTI grants for those employees considered critical to delivering our objectives.
Over the next few years.
Speaker 2: The estimated cash cost of this purchase is around $70 million and will likely complete in H1.
The estimated cash cost of this purchase is around $70 million and will likely complete in atrium.
Speaker 2: I will now hand you back to Stephen to provide an operational update and outline our priorities for the next two years.
I'll now hand, you back to Steven to provide an operational update and outlined our approaches for the next two years.
Thank you Mark.
Speaker 1: Let me start with a high-level recap of the progress made last year to set the context for how we will build on this looking forward.
Let me start with a high level recap of the progress made last year to set the context for how we will build on this looking forward.
Speaker 1: The move to a single set of systems is a critical element of how we are simplifying the business to deliver much more flexibility and agility for our teams, and ease of doing business for our customers.
The move to a single set of systems is a critical element of how we are simplifying the business to deliver much more flexibility and agility for our teams and.
And ease of doing business for our customers.
Speaker 1: As I said earlier, we have now closed our third quarter on the platform smoothly and continue to identify opportunities to remove unproductive costs.
As I said earlier, we have no closed the third quarter on the platform smoothly and continue to identify opportunities to remove unproductive cost in.
Speaker 1: In product, we're really pleased with the progress made last year, particularly in SAS and how we repositioned to cyber resilience.
In product, we're really pleased with the progress made last year, particularly in SaaS and how we reposition to cyber resilience.
Speaker 1: We refocused our approach in both ITOM and EDM, consolidated progress in IM&G, and built on our leadership position in EMC.
We refocused their approach in both item and EDM consolidated progress and I am in G and built on our leadership position in AMC.
Speaker 1: And we've taken important first steps and established our more specialist global sales.
And we've taken important first steps and establish a more specialist global sales force.
Speaker 1: Through the remainder of this year and next, we will build on this through the execution of the following three strategic priorities. Number one, transition to a product group operating model.
Through the remainder of this year and next we will build on this through the execution of the following three strategic priorities.
Number one transition to a product group operating model.
Speaker 1: We have a broad portfolio operating in markets with different challenges and opportunities.
We have a broad portfolio operating in markets with different challenges and opportunities.
Speaker 1: As a result, we need to continue to build deeper levels of specialist capability. That is aligned by product portfolio, coupled with increased agility, such that we compete more effectively and win more of the market opportunity available.
As a result.
We need to continue to build deeper levels of specialist capability that is a lane byproduct portfolio, coupled with increased agility, such that we compete more effectively and win more of the market opportunity available.
Speaker 1: In addition, this approach will create more optionality for value creation as was evidenced by the digital safe transaction.
In addition, this approach will create more optionality for value creation as was evidenced by the digital safe transaction second.
Speaker 1: Secondly, continued focus on the installed base.
Secondly continued focus on the installed base.
Speaker 1: We delivered significant innovation and improvements across the portfolios last year and have clear plans to do so again this year.
We delivered significant innovation and improvements across the portfolio was last year and have clear plans to do so again this year.
Speaker 1: We see lots of opportunity for improvement in how we enable customers to exploit this innovation. Executing this comprehensively and consistently will ensure customers see more business value faster with improved return on invest.
We see lots of opportunity for improvement and how do we enable customers to exploit this innovation executing this comprehensively and consistently will ensure customers see more business value faster with improved return on investment.
Speaker 1: This will translate into improved retention rates and additional revenue through new project deployments and product expansion. Thirdly, utilizing the Enterprise Wide Plop.
This will translate into improved retention rates and additional revenue through new project deployments and product expansion thirdly, utilizing enterprise wide platform.
After several years of duplication and inefficiencies, we know how of the foundation to drive simplification in our business and we intend to exploit this affiliate as possible.
Speaker 1: After several years of duplication and inefficiencies, we now have the foundation to drive simplification in our business, and we intend to exploit this as Philly's boss.
Speaker 1: Through the combination of these initiatives, we're building a business that is focused by product portfolio and supported by operational hubs to drive efficiency and agility so that we optimize the performance of each portfolio.
It's really the combination of these initiatives we are building a business stays focused byproduct portfolio and supported by operational hubs to drive efficiency and agility. So that we optimize the performance of each portfolio.
Speaker 1: coming now to the product portfolios, but before covering the key points by individual portfolio, I want to underscore that across the board, we're executing plans to improve maintenance renewal rates and increase recurring revenue through our subscription and SaaS offering.
Turning now to the product portfolios, but before covering the key points by individual portfolio I want to underscore that across the board, we're executing plans to improve maintenance renewal rates and increase recurring revenue through our subscription and SaaS offerings.
Speaker 1: We're also tracking operational metrics around adoption of our latest product releases as a key leading indicator of future performance in these areas. In cyber reds, our bread and ability to execute at scale and in an integrated fashion differentiates us from point solution competitors.
We're also tracking operational metrics around adoption of our latest product releases as a key leading indicator of future performance in these areas in cyber Reds, our breadth and ability to execute at scale and in an integrated fashion differentiates us from point solution competitors.
Speaker 1: We're already growing in two of our four support folials, our on track to do so in a third, and our advanced interaction plans to reposition our track.
We're already growing in two of our four sub portfolios.
We're on track to do so in a third.
And they're very advanced interaction plans to reposition arclight.
Speaker 1: On this point specifically, we have delivered very significant product improvements and have more planned. Where no focus on helping our customers exploit these new releases, Julie.
But at this point, specifically, we have delivered very significant product improvements and have more planned. We're now focused on helping our customers exploit these new releases Philly.
Speaker 1: In AMC, we're consolidating and strengthening our leadership position in helping some of the largest companies in the world modernize the mainframe applications to the cloud which we do both directly and through strategic partnerships such as AWS.
In E&C, we're consolidating and strengthening our leadership position in helping some of the largest companies in the world modernize the mainframe applications to the cloud, which we do both directly and through strategic partnerships such as AWS.
Speaker 1: In ADM, we have a proven track record, deep capabilities, and a large install base of customers who depend on our solutions every day. So firstly, we're focused on helping them fully adopt the innovation we deliver in this area. Additionally, we'll continue to deliver on our SaaS roadmaps and help customers to transition to these offerings as appropriate. In ITOM, our priorities are to deliver AI ops at the core of our service assurance portfolio.
And ADM, we have a proven track record deep capabilities and a large installed base of customers who depend on our solutions every day.
So firstly, we are focused on helping them fully adopt the innovation we delivered in this area. Additionally, we will continue to deliver on our SaaS roadmaps and help customers to transition to these offerings as appropriate and item our priorities are to deliver AI ops at the core of our service assurance portfolio.
Speaker 1: cloud-native and hybrid capabilities in service management and accelerate the delivery of our fast road month.
Cloud native and hybrid capabilities and service management and accelerate the delivery of our SaaS roadmaps.
Speaker 1: We're on track with these initiatives, and again, this is quarter our goal of improving maintenance performance. Finally, in IM&G, this portfolio's performing broadly to expectation.
We're on track with these initiatives and again this is core to our goal of improving maintenance performance.
Finally ni LNG this portfolio is performing broadly to expectations.
Speaker 1: Additionally, we see a huge opportunity in big data and a confident no-rability to deliver growth. In aggregate.
Additionally, we see a huge opportunity in big data and are confident in our ability to deliver growth.
In aggregate.
Speaker 1: At the group level, we're seeking to balance revenue, profit and cash generation from the overall portfolio and create strategic flexibility and how we pursue value creation for shareholders. One of the benefits of moving to this product group model is that we will be able to give you increased levels of disclosure at the product portfolio level. This will be in place for the staff.
At the group level, we're seeking to balance revenue profit and cash generation from the overall portfolio.
And create strategic flexibility and how we pursue value creation for shareholders. One of the benefits of moving to this product group model is that we will be able to give you increased levels of disclosure at the product portfolio level.
This will be in place for the start of FY 'twenty three.
Speaker 1: I would like to finish by reconfirming the financial outcomes we're targeting for the exit of FY23. Firstly, revenue trajectory of flat or better driven by growth in cyber, AMC and IM&G, and significantly improved performance in ADM and IT.
I would like to finish by Reconfirming the financial outcomes, we're targeting for the exit of FY 'twenty, three firstly revenue trajectory of flat or better driven by growth in cyber AMC and IMG.
And significantly improved performance in ADM and Idaho.
Secondly, capturing efficiencies and productivity gains through the reshaping and simplification of our business with the target of delivering overall gross cost reduction of between 400 and $500 million.
Speaker 1: These actions will combine to deliver an exit run rate of 3 cash of $500 million per annum.
These actions will combine to deliver an exit run rate of free cash flow of $500 million per annum.
Speaker 1: In closing, the foundations we committed to are now in place, and we're 100% focused on the execution of our objectives through to FY 23.
In closing.
The foundations, we committed to all now in place and we're 100% focused on the execution of our objectives through to FY 'twenty three.
Speaker 1: Thank you for your time today and I'll now pass back to the operator to open up the call for CUNY.
Thank you for your time today and I'll now pass back to the operator to open up the call for Q&A.
Speaker 3: Thank you so much. And if you would like to ask a question on today's call, please press for one on your telephone keypad. You then be introduced to ask the question. Again, it is for one on your telephone keypad to ask a question on today's call.
Thank you so much and if you would like.
Question on todays call. Please press.
One on your telephone keypad, you that'll be introduced.
Shin again.
<unk> on your telephone keypad to ask the question.
Paul.
The first question is coming from the line of Charlie Brennan.
Speaker 3: The first question is coming from the line of Charlie Brennan, Colin von Jeffree. Charlie, you're unmuted. I'm going to go back.
Jeffrey Charlie.
Go ahead.
Speaker 4: Great, good afternoon and thanks for taking my question. Can I start with two if that's possible? The first is just in listening to your comments, it sounds like there's probably slightly greater confidence on the outlook for 23 than there might be for 22.
Great. Good afternoon. Thanks for taking my question can I start with two if that's possible.
First is just in listening to your comments it sounds like there's probably slightly greater confidence on the outlook for 'twenty three than than they might be for 'twenty two.
Speaker 4: You obviously got a range of indicators that you lock out that we don't see, and you've got some things that are in the pipeline like AWS that will benefit 23 that we don't have in 22. But can you give us a few other things beyond AWS that give you the confidence that 23 is gonna be a much better year?
You've obviously got a range of indicators that you look at the we don't see and you've got some things that are in the pipeline like AWS, but will benefit 'twenty three that we don't have in 'twenty, two but can you give us a few other things beyond AWS that gives you the confidence that the 23 is going to be a much better.
Yeah.
Speaker 4: And then secondly, you touched on the problems of staff retention in the prepared remarks. Can you just give us some insight into the sort of attrition levels you're seeing and whether you're seeing anything there that's giving you any calls for alarm. You've obviously highlighted the EBT, but does that feel enough in the current environment to keep the people you need?
And then secondly, you touched on the problems of.
Staff retention in the prepared remarks can you just give us some insight into the sort of attrition levels youre seeing.
And whether youre seeing anything there, that's giving you any cause for alarm.
You've obviously highlighted the EBT, but does that feel enough in the current environment to keep the people you need thanks.
Speaker 1: Okay, Charlie, let me do the second one first. Like everybody in the marketplace, and I'm sure all the commentators that you've heard yourself, no one's really seen a labor market like we have today, and clearly we're not immune to that.
Okay, Charlie let me do the second one first.
Like everybody in the marketplace and I'm sure all the commentators that you've you've heard yourself no one's really seen a labor market like we have today and clearly we're not immune to that.
Speaker 1: We also have a really talented workforce that solves some of the most difficult challenges customers face every day and they've got really interesting work and enjoy that work. We're not in any way disproportionately concerned about the attrition more than anyone else would be in an industry-wide phenomenon that we're all seeing today. What we're doing is working on sharpening our employee proposition for both retention and recruitment.
We also have a really talented workforce that solve some of the most difficult challenges customers face every day, and we've and they've got really interesting work and enjoy that work.
So we'll all in any way disproportionately concerned about the attrition more than anyone else would be an industry wide phenomenon that we're all seeing today and what we're doing is working on sharpening her employee proposition for both retention and recruitment, yes, as I said, providing those career development and expansion opportunities.
Speaker 1: As I said, providing those career development and expansion opportunities for the team and using the other levers of levers at our disposal like the stock options that we've touched on.
<unk> for the team and using the other levels of levers at our disposal like the like the stock options that we've touched on.
Speaker 1: We've got some areas of heightened nutrition and we've got overall nutrition that's clearly above pre-COVID levels with some pockets that we're dealing with but it's no more and no more unique for us than it is for anyone else in the marketplace and we've got pretty decent and robust plans to deal with it.
We've got some areas of heightened attrition and with good overall attrition, that's clearly above pre COVID-19 levels.
With some pockets that we're dealing with but it's no there's no more and no more unique for us than it is for anyone else in the marketplace and we've got pretty decent and robust plans to deal with it.
Speaker 1: In terms of the revenue outlook.
In terms of.
In terms of the revenue the revenue.
Alex.
Speaker 1: We're pleased with the progress we've made. Since we laid out 60 days ago, we laid out very detailed plans for what we're going to get done through the exit of FY23.
We're pleased with the progress we've made since we laid out 60 days ago, we laid out a very detailed plans for what we're going to get done through the exit of FY 'twenty three.
Speaker 1: We're confident in those objectives, we're incrementally more confident every time we talk to you, and we're seeing some of the leading indicators in terms of...
Confident in those objectives were incrementally more confident every time, we talk to you.
Yes, we're seeing some of the leading indicators in terms of getting customers until late discussions of our product which gives us some.
Speaker 1: getting customers until the latest versions of our product, which give us some additional confidence in the underlying maintenance performance, beginning to moderate and improve over time. As I mentioned, we've got security on, we've got really good growth in two of our four portfolios. We're very, very close to getting the third.
Additional confidence in the underlying maintenance performance beginning to moderate and improve over time as I mentioned, we've got the security on we've got really good growth in two of our four portfolios, we're very very close to getting the thought.
Speaker 1: you know, into exactly where we wanted it to be. We've got work to do on the fourth one, and the extent that we can accelerate the improvement in maintenance there really gives us a strong proposition in security, and we're very pleased with the overall portfolio.
To exactly where we wanted it to be we got work to do on the fourth one and then the extent that we can accelerate the improvement in maintenance. They are really gives us a strong proposition and security and we're very pleased with the overall portfolio.
Speaker 1: The SAS roadmaps that we've laid out in ITOM have been very well received by customers and we're making good progress in the SAS capabilities that we already have and accelerating those in EC2.
Roadmaps that we've laid out an item has been very well received by customers and we're making good progress in the SaaS capabilities that we already have an accelerating those in.
In ADM.
Speaker 1: So, you know, there's a lot in here, Charlie, there's a lot of moving parts, but we really do have increasing conviction every time we talk to you on our ability to deliver against what we've achieved and what we set out for 23. We haven't made any changes to what we said in November about 22.
So there's a lot in here Charlie Theres, a lot of moving parts.
Yes, but we really do have increasing conviction every time, we talk to you in our ability to deliver against what we've achieved what we set out for 'twenty. Three we haven't made any changes to what we said in November about 'twenty two.
Speaker 1: Yeah, and since then you've all updated your models and we very much appreciate you doing that. As a result, we think that the revenue consensus for the full year is there, thereabouts. We stress two points though. Progress is not going to be linear, but we really do have increasing conviction on our ability to deliver the objectives through 23 that I've laid out.
And since then you've updated your models and we very much appreciate you doing that as a result, we think the revenue consensus for the full year is there or thereabouts and we stress two points. The progress is not going to be linear, but we really do have increasing conviction on our ability to deliver the objectives through 'twenty three that I've laid out.
Speaker 4: Perfect. Can I just circle back on the attrition? Is it fair to say that the majority of the attrition is in the sales side of the business? And again, is that feeding into some of your revenue observations for 2022?
Perfect.
Back on nutrition is it fair to say the majority of your attrition during the sell side of the business.
And.
Again is that feeding into some of your revenue observations for 'twenty two.
Speaker 1: Is pockets and sales, certain countries, certain portfolio areas, is pockets and development, we've got really talented development teams as well. So it's more pockets and elevated overall, for all the dynamics that you've seen playing out, you're playing out in the industry.
Hi.
Pockets in sales set with countries.
Ah portfolio areas is pockets in development, we got really talented development teams as well.
So it's more pockets in an elevated overall for all the dynamics that you've seen playing playing out in the industry.
Speaker 1: We're able to recruit, we're attractive employer, we're not worried about our ability to recruit talent. Obviously you've got a ramp phase when you recruit, so we're balancing retention. We're also seeking to try and use it as an opportunity to remex because we're changing the way to where we're putting some of our resources, so we're trying to exploit it as an opportunity as well, Jellie.
We're able to recruit where attractive employer, we're not worried about our ability to recruit talent, obviously, you've got a ramp phase when you recruit so we're balancing retention. We're also seeking to try and use it as an opportunity to remix because where we're changing the way to where we're putting some of our resources. So we're trying to exploit that as an opportunity as well.
Perfect. Thank you.
Thank you so much Charlie for your question and as a reminder.
Speaker 3: Thank you so much, Charlie, for your question and as a reminder, it is star 1 on your telephone keypad. If you would like to ask a question on today's call, that is star 1 on your telephone keypad. The next question is coming from the line of Michael from UBS. Michael, you're now unmuted. I mean, I'll go ahead.
One on your telephone keypad, if you would like to ask a question on today's call that is star one on your telephone keypad.
The next question is coming from the line of Michael <unk> from UBS. Michael You are now on me that I will now go ahead.
Speaker 5: Yes, thanks good afternoon. Just on the cost side of things, I appreciate the alternative performance measures showing us the underlying trend there. And R&D was...
Yes, thanks, good afternoon.
Just on the cost side of things I appreciate the.
It will turn into performance measure Cheng the underlying trend.
Trend Devin on R&D was up 1% can you talk because of where the savings will be visible over the next couple of years should we assume the R&D will continue to grow in absolute.
Speaker 5: We talk of where the savings will be visible over the next couple of years. Should we assume that R&D will continue to grow in absolute terms?
Speaker 5: Also on the gross margin it looks like it came down just about a just under a percentage point And I'm just curious to what extent it's that and
And also on the gross margin it looks like it came down just about just under a percentage point.
Curious to what extent.
This is despite consulting falling.
More than average.
Speaker 5: to what it says is this down to the SaaS transition and the build up more hosting costs and what we should expect from that over the next couple of years. And then I've got to follow up. Thanks.
To what extent this down to the SaaS transition in the build up more hosting costs.
What we should expect from that over the next couple of years.
And then I've got a follow up thanks.
The.
Speaker 1: I think it was at the strategy they had made, it may have been earlier than that. We talked about the fact we've re-architected quite a number of our SaaS solutions to be able to be deployed through the public cloud, whether that's AWS or Azure or GCP. And that's taking on premise data centers and shutting those down and decommissioning them and moving customers to that public cloud infrastructure. We're pretty much there, thereabouts in terms of all of our ADM business now is onto public cloud infrastructure. It is working in a sense.
Yes.
I think it was at the strategy day. It may have been it may have been earlier than that we talked about the fact, we've re architected quite a number of our SaaS solutions to be able to be to play clearly the public cloud, whether that's AWS or azure or or TCP.
And that's taking.
On premise data centers, shutting those down and decommissioning them and moving customers to the public cloud infrastructure.
We're pretty much there or thereabouts in terms of all of our ADM business now is onto public cloud infrastructures.
Speaker 1: Yeah, I'm most systematically move the rest where it makes sense. So that's really about quality of service.
And we will systematically move the rest where it makes sense. So that's really about quality of service.
Long term flexibility the offering Microsoft.
Speaker 1: you know, a long-term flexibility, the offering, Michael Sillard, you know, and all that's a very good thing.
The whole, it's a very good thing.
Speaker 1: And it's in the guidance that we've laid out so there's nothing, you know, there's no incremental there that we haven't already, we haven't already talked to. In terms of costs.
Allison it's in the guidance that we've laid out so theres nothing.
There is no incremental there that we haven't already we haven't really talked to in terms of costs.
<unk>.
Speaker 1: We will continue to deliver our innovation agenda, we're not going to compromise what we're doing in product development at all. We think we've got tremendous opportunities in pretty much every line of the P&L where we've had to live with a degree of inefficiency over a number of years that we can now get after. And we have on top of that opportunities to give our teams now better tools, better data, a way of doing the job faster and in terms of a more rewarding fashion. So we see quite a lot of opportunities, have pretty granular plans for costs.
We will continue to deliver innovation agenda, we're not we're not going to compromise what we're doing in product development at all we think we've got tremendous opportunities in pretty much of relating to the P&L, where we had to live with a degree of inefficiency over a number of years that we can now get after and.
And we have on top of that opportunities to give our teams know better tools better data.
We are doing the job faster and in terms of a more rewarding fashion. So we see we see quite a lot of opportunities a pretty granular plans for cost.
Speaker 1: cost take out this year and the milking plans for her will do the rest next year. So you know, pretty confident with the plan as it stands today.
Cost takeout this year and the melting plans for how we will do the rest next year, so pretty confident with the plan as it stands today.
Speaker 5: Just to come back on the gross margin, I mean, I assume if you're cutting data center costs and other things, there's some savings, but I mean, the cost of hosting, obviously more than offsetting that. So should we expect gross margin?
Just to come back on the gross margin I mean, I assume if you're cutting datacenter costs and other things.
Savings.
I mean, the cost of hosting obviously more than offsetting that so should we expect gross margins to <unk>.
Speaker 5: continue to trend lower and the efficiency to further down the P&L or they sort of set
Continued to trend lower in the efficiencies of further down the P&L or is this sort of set to improve.
Speaker 2: Yeah, I think, Michael, it's Matt here. I think you'll see a continuation, slight reduction in the margin next year. But then I think our cost programs will get ahead of it and we'll see the margin turn around. So clearly we're going after below the line savings first, but there are some things we can do above the line as well. It just takes a little bit longer. So.
Yes, I think.
I think youll see.
A continuation of a slight reduction in the margin next year, but then I think our cost programs will get ahead of it and we will.
See the margin.
Set around so.
Clearly regarding offset below the line savings first but there are some things we can do above the line. So I'll just take a little bit longer so.
Speaker 2: You know, so the answer to the question is we do see an improvement in margin coming certainly 23 onwards.
Yes.
So the answer the question is we still do see an improvement in margin coming certainly 23 elements.
Speaker 5: Okay, and then just to follow up, Stephen, on the M&A side of things, you know, are there more opportunities for sale that are quite sort of tangible or near? And equally, what is your appetite for doing acquisitions to enhance the portfolio? You've obviously done a few in the past, but what sort of scale?
Okay, and then just a follow up Stephen on the M&A side of things.
Are there more opportunities to sale that took quite sort of tangible.
And equally what is your appetite for doing acquisitions to enhance the portfolio.
Obviously done a few in the past, but what sort of scale would you consider.
Speaker 1: We've gone three or four actually in the past 14 months, small technology-oriented tokens that accelerate a piece of the roadmap or provide an adjacency that rounds out a solution. We did one in behavioral analytics, for example, in security, which is fantastic technology, really well received by customers. We've got a kind of pipeline of those types of acquisitions that we're continually.
We've gotten.
Three or four actually in the past 14 months small technology oriented tuck ins that accelerated a piece of the roadmap or provide an adjacency that rounds out our solution. We did one in behavioral analytics for example, in security, which fantastic technology really well really well received by customers.
Got it.
Pipeline of those types of acquisitions that we're continually continually looking at and we will take that opportunistically whenever whenever it presents itself as we move to this more product portfolio approach Michael It gives us clarity on what we need to get done there much more decisively. So we'll do more we'll do more of those.
Speaker 6: continually looking at and we'll take that opportunistically whenever it presents itself as we move to this more product portfolio approach Michael it gives us clarity on what we need to get done there much more decisively so we'll do more you know we'll do more of those
Speaker 1: In terms of future disposals, the
In terms of.
Future disposals.
The execution plans the same execution plan irrespective of whether we own an asset forever or we decided that there is a better opportunity for our customers and shareholders by combining asset with someone else like we did with <unk> with like we did with digital safe. So all we're doing now is creating additional flexibility by improve.
Speaker 6: Execution plans the same execution plan irrespective of whether we own an asset forever or we decide that there's a better opportunity for customers and shareholders by combining that asset with someone else like we did with like we did with digital safe. So all we're doing now is trading additional flexibility by improving the performance of each of our individual portfolios to create that flexibility as we look forward.
Moving the performance of each of the individual portfolios to create that flexibility as we look forward.
Okay. Thank you.
Speaker 3: Thank you so much Michael and the next question, you're the cutest coming from the line of Will Wallars from New Mist. Well, you're unmuted, I'm gonna go ahead.
Thank you so much Michael and the next question in queue is coming from the line of well wallets.
Well you're on mute M&A will go ahead.
Speaker 2: Thanks very much. I want to ask you about the timing of when we're going to see when we should expect to see certain of the Things that you're doing coming to effect so in particular firstly when do you think we will see the cost savings coming through in terms of the Peer now is it you know what what are we going to see in H1 in terms of cost savings or do we have to wait until H2 or whatever
Thanks, very much I wanted to ask about the timing of when we're going to see when we should expect to see certainty.
Things that youre doing coming to effect, so I would take the firstly when do you think we will.
See the cost savings coming through in terms of the P&L is it.
What are we going to see in each one in terms of cost savings or do you have to wait until age two or whatever.
Speaker 2: And secondly, a similar sort of question in relation to maintenance and an improvement, potential improvement in your renewal rates, how quickly should over the two-year journey that you've mapped out, should we expect to see that coming through another?
Similar sort of question in relation to maintenance.
<unk> potential improvements in your renewal rates how quickly should over this two year journey that you've mapped out.
Should we expect to see that coming through in Ocado for other questions.
Speaker 2: I spell on the cost savings. So we've been busy taking costs out already, so we'll split out for you.
Shall I start on the cost savings.
Being busy.
Taking our already so we'll slip out.
The gross impact of the cost we've taken out and then you'll see the net impact through the P&L the massive quite unsatisfactory friendly.
Speaker 2: the growth impacts of the cost of taking out and then you'll see the net impact through the P&L. The mass of it are quite unsatisfactory, frankly. You know, if I just illustrate it with a simple model, if we take out 100 million a year for the next three years, clearly the average this year's 50, next year, 150 the year after 250, having taken out 300. So, you know, it's a bit, you know, it's always a bit underwhelming when you see the first half results.
If we if I just illustrated with the simple model, if we take out $100 million a year for the next three years clearly the average. This year is 50 next year of $1 50, a year off the $2 50, having taken out 300.
It's always a bit underwhelming when you see the first half results.
Speaker 2: It's like we're worth 50 million moves taken out. And you know, yet more disappointment or round, I'm sure. But we can demonstrate the reduction in the head count, reduction in the cost savings.
With 50 million we've taken out.
And yet.
Yet more disappointment around I'm sure.
We can demonstrate the reduction in the head count reduction in the cost savings.
Speaker 2: And what it's also allowed us to do, and I'm quite pleased we got into it, is we were pretty clear about 500-out gross, 300-out net, because that's a lot.
And what it's also allowed us to David I'm quite pleased we got into it.
We were pretty clear about 500 out gross 300 out net because that's allowed us to.
Speaker 2: to the mover in this hot market for labour and make sure we're giving appropriate salary increases. And I was quite pleased we got on the front foot with that. Do you want to move the run? Yeah.
Maneuver in this hot market for labor and make sure we're giving appropriate salary increases and I was quite pleased the government front with that.
Yes.
Speaker 6: Yeah, well, we're really confident in the actions we're taking will result in a stabilization of maintenance. And our goal really is getting to that point as quickly as possible. The rate of progress we're expecting is modeled in those FY23 outcomes. To the extent we can get there faster, it's clearly a benefit. But we're expecting the material improvements to be evident in 23 with the foundations for that being in place, you know, through the coming months and the remainder of FY20.
Yes.
We're really confident in the actions. We're taking will result in the stabilization of maintenance and our goal really is getting to that point as quickly as possible.
The rate of progress we're expecting is modeled in those FY 'twenty three outcomes.
To the extent, we can get there faster is clearly a benefit but.
We're expecting the material improvements to be evident in 2003 with the foundations for that being in place through the coming months and the remainder of FY 'twenty two.
Okay, great. Thank you and then the other question was on pricing, obviously, you're in an inflationary environment.
Speaker 2: Okay, great. Thank you. And so the other question was on pricing, obviously, in an inflationary environment. To what extent are you contractually getting price increases? To what extent are you choosing to increase prices? Or to what extent are you looking to invest by effectively not putting through prices?
To what extent you contractually getting price increases to what extent are you choosing to.
Increased prices or to what extent you are going to invest.
Not putting through price increases.
Speaker 6: Well, most of the new business that we do is project oriented and that's a value return dynamic is not materially shifted when we are the other by the macro environment on and
While most of the most of the new business that we do is project oriented and Thats.
Thats a value return dynamic is no it's not materially shifted one way or the other by the macro environment.
Speaker 6: inflationary pressures. So that's the bulk of the new work that we would do. In terms of the pre-contracted work, then obviously we've got a lot of renewals that run for a year or longer, and those are already priced. And when the renewal comes up for, when it comes up for renewal, we always have done and we'll continue to look for what the appropriate additional price increase.
Inflationary pressures so that.
Yes, so thats the bulk of the new block that we would do in terms of the pre contracted work. Then obviously, we've got a lot of renewals that running for a year or longer and most of them are already priced and when the renewal comes up for.
When it comes up for renewal.
We always have done and will continue to look for what the appropriate additional price increase that is.
Speaker 6: That is right at that time, it varies by portfolio and it varies by country and it varies by circumstance. But it's not the macroinflationary pressures don't present a material upside forward.
Is right at that time, it varies by portfolio and it varies by country and it varies by circumstance, but it's not the macro inflationary pressures don't present, a material upside for us.
Thank you.
Thank you so much for your questions everyone and there are no further questions in the queue I will now hand, it back over to your host Stephen <unk> concludes today's conference.
Speaker 3: Thank you so much for your question, everyone. And there are no further questions and a Q. So I'll now hand it back over to your host, Stephen, to conclude today's conference. Thanks.
Okay, well thanks, everyone.
Speaker 6: We did a prequels in November and what delighted to be able to reconfirm those numbers today. We also later detailed plan and objectives and a strategy day at the end of November .
We did a pre close in November and we're delighted to be able to reconfirm. Those numbers. Today. We also laid out a detailed plan and objectives and the strategy day at the end of November So roughly 60 days ago again, we're reconfirming those goes today and that we've made material progress since completing the sale of digital safe and separating the business refinancing.
Speaker 6: So roughly 60 days ago, again, we're reconfirming those goals today and that we've made material progress since completing the sale of digital safe and separating the business, refining, re-financing part of our debt to smooth the profile as we committed to that. Identified and begun executing on cost and efficiency opportunities.
Prepayments and part of our debt to smooth the profile as we committed today.
Identified and begun executing on cost and efficiency opportunities.
Speaker 6: And incrementally, we're really pleased with the product agenda, the reaction we're getting to that from customers, and we feel increasingly confident in our ability to deliver the exit trajectory that was committed to for 23.
And incrementally we were really pleased with the product agenda. The reaction, we're getting to that from customers and we feel increasingly confident in our ability to deliver.
The exit trajectory that we've committed to for 2003.
Speaker 6: And we'll just get back to the day job now and see how we can make progress faster.
And we'll just get back to the day job.
And see how we can make progress faster.
Thanks, everyone.
Speaker 3: Thank you everyone for joining us on today's call. The Immunal Disconnect Your Handsets Host. Please click on Active.
Thank you everyone for joining us on today's call you may now disconnect. Your handsets house. Please stay connected.
Speaker 7: The.
Yeah.
Yes.
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