Full Year 2024 Diageo PLC Earnings Call - Q&A
CSI This conference is being recorded.
Jay: Ask a question today. Please press star followed by one on your telephone keypad to withdraw your question itself followed by Jay We are now ready to start the call Debra. Please go ahead.
Speaker Change: Good morning, and thank you for joining our preliminary results call for fiscal 'twenty four.
Speaker Change: Hope you've had a chance to read our press release and watch our presentation on the Ico Dot com.
Speaker Change: 24, it was a challenging year for both our industry and the ico as we navigated a volatile operating environment across the Globe group organic net sales declined <unk>, 6% and the main driver was materially weaker performance in lap, our Latin America and Caribbean region.
Speaker Change: For perspective, if you exclude lack organic net sales grew plus one 8% driven by resilient growth in Africa, Asia Pacific and Europe regions.
Speaker Change: This offset the decline in North America, which was attributable to a cautious consumer environment retailer inventory adjustments and the impact of lapping inventory replenishment in the prior year.
Speaker Change: We made good progress against our strategic priorities and we ended fiscal 2000 and for gaining or holding share in over 75% of our net sales value in measured markets, including in the U S. We also took deliberate actions to improve on near term execution and these include meeting our commitment to improve our inventory position and lack.
Speaker Change: That being up our route to market across several key markets, including our most significant transformation in at least a decade in our U S spirits organization and delivering a record productivity savings of nearly $700 million we've.
Speaker Change: We've also generated $2 6 billion and free cash flow, while continuing to invest for long term growth.
Speaker Change: Looking ahead to fiscal 'twenty five the consumer environment continues to be challenging and we expect the challenges we saw towards the end of fiscal 2004 to persist.
Speaker Change: Our focus continues to be on strengthening our business resilience and investing smartly in strategic initiatives to enable us to return to growth when the consumer environment improves.
Speaker Change: I continue to believe in the long term fundamentals of TBA, the icos advantage position within it and our ability to grow ahead of TBA and game quality market share.
Speaker Change: He will open it up for questions.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Can we get the questions started.
Speaker Change: Okay.
Speaker Change: Thank you as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Our first question for today comes from Simon Hales of Citi. Your line is now open. Please go ahead.
Simon Hales: Thank you morning every morning.
Simon Hales: Couple of questions from me Hi, Debra.
Simon Hales: I was just wanted to understand it.
Speaker Change: I'm not sure I understand your comments around where inventory levels are at trade as we head into fiscal <unk>. Thank.
Paul: Thank you Paul.
Speaker Change: In the prepared presentation correctly, what you're saying is that.
Speaker Change: Although we could see a further deterioration in demand.
Speaker Change: Actually lead to so long ago, you destocking throughout the supply chain in the absence of further deterioration in demand.
Speaker Change: Stock levels are appropriate now in most markets, perhaps with the exception of Mexico.
Speaker Change: Right.
Speaker Change: Think about it if I got that correct or are you still expecting in the U S to see further wholesaler or retailer destocking in the first half.
Speaker Change: My first question.
Speaker Change: Okay.
Speaker Change: And then secondly.
Speaker Change: Again in the prepared remarks. Thank you just one little above your slides she called out the different performance through the year Ross the different price tiers within your portfolio clearly value has outperformed the premium segments of the portfolio of this year.
Speaker Change: I Wonder if you could talk about how we would exit the year in terms of the.
Holmes led to different price points is there any signs at all.
Speaker Change: Premium is starting to see some improvement relative to value.
Speaker Change: <unk>, which we X out the lack of Destocking effects.
Yeah. So I'll go ahead and take the first one on inventory levels and kind of step through the royalty you can still do that and then I'll pass to <unk> to follow up on the price to your question. So.
Speaker Change: So first of all we ended up and really good inventory levels.
Speaker Change: I'd say really across the world.
Speaker Change: Let me start with lax since that has been the one that we.
Speaker Change: The committed at the Interims that we would get back to more appropriate levels and that's where we have done.
Speaker Change: Significant destocking.
Speaker Change: Working with the wholesalers and customers in the region.
Speaker Change: And last we have delivered on the commitment that we set out at the Interims.
Speaker Change: We did call out Mexico, specifically in the presentation and the reason that we did it isn't so much the where we think we have a bunch of inventory left it's just the volatile environment that we are still seeing in that market. We're still seeing significant competitive activity. There is some down trading in tequila, and Scotts, which of course is.
Speaker Change: To us and we're not gaining share and so because of this we do believe we're at certainly more appropriate levels for the for the environment, but it is just.
Speaker Change: It's still a deteriorating situation so.
Speaker Change: Versus having a some kind of big bounce back.
Speaker Change: Just calling out that it really is.
Speaker Change: About the consumer situation, there, but certainly.
Speaker Change: We would expect our performance overall tomorrow aligned to that consumer demand going forward. So that's Latin America.
Speaker Change: <unk> around the rest of the globe, where we're really seeing very normal kind of our historic kind of forward days cover.
You know as we step around the world, we have called out a couple of other inventory things.
Speaker Change: In APAC.
Speaker Change: Our <unk> business, they were quite low going into the last fiscal.
Speaker Change: I'm, just not really knowing when when we were going to emerge out of Covid.
Speaker Change: And then they restocked at the beginning in the first half of fiscal of our fiscal 'twenty three the back half of the calendar year of 'twenty three and so we're going to have to lap that this year, we're going to have to lap that restocking in <unk>.
Speaker Change: In China in APAC and then also.
Speaker Change: Look the U S situation, we have not we are fine on distributor inventory. We've been fine. We ended with the same level of date, we actually have taken out some inventory just getting it appropriate for the environment, but.
Speaker Change: Overall, we have complete transparency in the U S.
Speaker Change: So we haven't had any problems at the wholesaler level at all and really from a retailer Destocking. This is the third round that we see of retailer destocking.
Speaker Change: It's less to do with.
Speaker Change: Frankly, I think thats more about interest rates remaining high and you just don't see retailers wanting to be caught long and also if you do the calculus on this it's not really worth it for them.
Speaker Change: Many cases to hold a lot of extra inventory and Theyre just not wanting to anticipate the consumer at all like I said. This is our third round I remember first talking to you guys about this back at our Scotch Investor Day.
Speaker Change: You know.
Speaker Change: More than a year ago. So this is.
Speaker Change: <unk> now seen inventory levels. This isn't you know length at this point, it's really isn't about even the coming out of the pandemic. This is more about just a in a higher interest rate environment, how they're choosing to manage their stock. So.
Speaker Change: Look I think overall, we we.
Speaker Change: Feel like we're in we're in good position, we do have to navigate to your point, we are having to navigate a volatile world.
But we are.
Speaker Change: Managing this quite closely and as you can imagine we've gone around and tested the robustness of our of what we can see with strengthened our consumer insight. So just making sure that we stay as close as possible to the situations. So so we don't have any kind of repeat of where we've been.
Speaker Change: Rami I'll pass it to you for the price of your question. Thank you Debra Hello.
Speaker Change: Hello, Simon so let.
Speaker Change: Let me just start by framing back why do we do see some pockets of down trading across the way premium amortization continues to be a tailwind for the.
Rami: The category and for our business.
Speaker Change: You know what what's driving the growth of the value here in fiscal 'twenty four it has really been the growth of the very strong performance of beer in Africa, and other whisky in India with each other with getting get go.
Almost double digits.
What's driving the growth of assai with you.
Speaker Change: If you look at the premium tier that.
Speaker Change: And above that was significantly impacted by Latin America.
Speaker Change: Latin America is much more premium business.
Speaker Change: And they have the least cost business as you know and as we took down the inventory levels in feed and Latin America down to a more appropriate level at the end of the year that impacted the numbers or the premium tier the premium tier would have grown at three 7%.
Speaker Change: If not if you exclude the impact of Latin America.
Speaker Change: More broadly speaking, it's Scott and <unk>.
Speaker Change: <unk>, which with.
Scott: With playing a premium or super premium and above price tiers, and if you really look at it and look at it and Scott as definitely said enough segmentation, we are gaining share in nine out of the box and largest market. So this is a business that's in good health and as we lap some.
Speaker Change: So sort of one time things that happened in fiscal 'twenty for that actually back even in fiscal 'twenty to be like the sale of finding of inverse suites in Russia as well as these acquisitions of inventory levels in North America.
Speaker Change: Come out of these in the past debate if you look at our largest.
Speaker Change: <unk> in the U S more than a 100% of the growth of the category.
Speaker Change: Coming from the Super premium and above price segments. So premium amortization does continue to be a tailwind for us and you know the numbers. That's why we took some time to explain these numbers out in the presentation. Yeah. One one other thing I'll just add to what <unk> said the Tequila also did impact this so.
Speaker Change: I think we shared a couple of these in the press release, but just to highlight for you remember we were lapping the restocking of Tequila. Because this was one that because of the high demand we recovered late from the glass shortages.
Speaker Change: So tequila is impacting this as well if you take a look at Don Julio the underlying depletions.
Speaker Change: I think a plus 21% compared to the shipments show up is plus 12 by the way those underlying depletions to align with the Nielsen NAPCO consumption is well above 20% and then cost amigos is showing that minus 22% actually if you look at Depletions, while still down is only down minus nine.
Speaker Change: If you look at the Nielsen naphtha on the last 12 months, it's minus seven.
Speaker Change: So you can see through there that that definitely impacted that shipment analysis and that would've shown up in the super premium tier.
Speaker Change: Thank you.
Speaker Change: Very helpful. Thank you.
Speaker Change: Thank you next question comes from Edward Mundy of Jefferies. Your line is now open. Please go ahead.
Speaker Change: Uh huh.
Speaker Change: Good morning, Deborah morning, two questions from me as well please.
Speaker Change: The first is really on your your best estimate on the timing of recovery.
Speaker Change: Industry within the U S. I know on slide nine you can give us some quite useful charts to say maybe the more recent trends.
Speaker Change: Yes.
Speaker Change: Part of what this industry is growing up.
Speaker Change: The stills versus Ltvs.
Speaker Change: Are you able to put any timeframe on when you think you might get back to that sort of mid single digit run rate.
Speaker Change: And then what do you think is the bridge to get back towards that middle single digit run rate is it volumes mix at prices today is rolling as Destocking comes from that I mean, how do you think about the bridge back towards.
Speaker Change: Sort of four to five ish run rate.
Speaker Change: And the second question is on <unk>.
Speaker Change: If I can.
Speaker Change: So Brian it's very well distributed really great through distribution gains because most pumps, but you can island.
Speaker Change: Since you brought new consumers into it or you've got existing same strict more.
Speaker Change: Could you maybe just deconstruct what's made us so successful.
Speaker Change: Story.
Speaker Change: We think it's going to be sticky another any learnings from get us it can be applied to some of your other brands.
Speaker Change: Yeah.
Speaker Change: I'll start with.
Speaker Change: Start with the U S and then I'll come back to get us.
Speaker Change: So look so going through the industry I mean, we do believe that in fiscal 'twenty for the U S industry grew in low single digits. If you take a look at that and break that out it was probably more one to two if you. If you include things like the spirit space RTD. It was probably more flat to one.
Speaker Change: If you think about core spirits, so and it.
Speaker Change: And look it wasn't even through the year. So we were seeing improvements and then dip down and then we saw a slight improvement again, and then it dipped down to it but it most likely is in the low single digits.
Speaker Change: As you look at it and if you look at NAPCO.
Speaker Change: That's what NAPCO because that captures everything it's not the most vibrant states, but because it captures everything that gives you a good.
Speaker Change: Point in context vol.
Speaker Change: Volumes were down on core spirits.
If you exclude all the RTD, but two thirds of that volume decline is in vodka and rum.
Speaker Change: So I look at that and you look at the heat that you still have on the tequila category, which is growing in things like plus 7% still even tucked into that low single digit number and I think you know the mix for us.
Speaker Change: Still makes us feel good because remember our north American whiskey business is bigger than our <unk> business.
Speaker Change: So.
Speaker Change: As we look at the industry.
Speaker Change: Sitting there in low single digits, but it is being dragged down by volume.
Speaker Change: Price mix actually in the industry is.
Speaker Change: It's holding up okay. So it really is about volume.
Speaker Change: And price mix, you had asked to breakout between the ready to drink and core spirits.
Speaker Change: You are kind of the bottle.
Speaker Change: Core spirits price mix with with probably two to three.
Speaker Change: We were above that.
Speaker Change: For the year. So you know we.
Speaker Change: We kind of look at that and feel pretty good when you have our Tvs in there it does bring down the price mix. So I do think it's important to break that out, but I think on core spirit.
Speaker Change: Price mix is starting to work its way back and it's because there's a lot of and you mentioned earlier, we actually over 100% of the growth is in the Super premium plus price tiers in the industry.
Speaker Change: We also saw household penetration of core spirits, plus 2%, so what youre seeing when you see these lower volumes is really the units per basket.
Speaker Change: You know are down and that is from this pressured if you think about vodka and rum. These are the more standard kind of base spirit and so those are those households that are under pressure.
Speaker Change: That are that are buying a little less we're not really seeing the down trading when people do go into buy they are buying still the brands that they want.
Speaker Change: And then we are still seeing spirits gained from beer and wine in the U S. So overall TBA household penetration kind of flattish sphere.
Speaker Change: Spirit.
Speaker Change: Just one.
Speaker Change: You are kind of flat and then why we're seeing is minus one so that's a little bit about the industry as far as the timeframe to recovery.
Speaker Change:
Speaker Change: When you break through all the noise and get around all these shipments and lapse, which thankfully you know what is it going to take to get back well, we clearly need to finish the rollout of all of that Covid Super cycle. Fortunately I think we're largely at the end of that.
Speaker Change: Certainly from our big lapse. So we don't we don't have that in our numbers as we roll forward. So that's a positive but the consumer recovery.
Speaker Change: You know and I do think things like rate cuts will certainly help if we get a rate cut in the U S.
The uncertainty with things like the political environment and some of that is.
Speaker Change: As you know when you do some of these and you look into consumer sentiment that's weighing on consumers a bit because we're even seeing consumers with you know with a little extra money being a little more cautious in their spending.
Speaker Change: It really is hard to predict I know I said six months ago that it would be six to 18 months. The only update I'll give you is that it wasn't six months.
And it was not linear.
Speaker Change: As we've kind of said there was a great July 4th.
Speaker Change: If you saw the Nielsen for July 4th we started to see you know we've had pretty decent spirits growth there in July.
Speaker Change: Sentiment is still it's quite cautious so I am just hesitant to put out any timeframe on it.
Speaker Change: What we're trying to do is really set ourselves up with.
Speaker Change: With getting back to share growth, we've got great share momentum.
Speaker Change: In the U S oncor spirits, not just in TBA that oncor spirit and and so that's really what we're focused on getting back there.
Speaker Change: Yes, let's talk about guidance because Genesis is a great new story.
Speaker Change: So plus 15%.
Speaker Change: And it's been driven in our largest markets and even in our home market of Ireland to your point, there's not a there's not a lot of places you can't buy again in Ireland that being said I do think the innovation agenda has helped us tremendously the nitrous Serge.
Speaker Change: That's the cap, we don't have it in the U S. But in in Ireland in GB as a cat you can kind of put on on top of again it can and it gives you just the perfect for Afghanistan.
Speaker Change: That has done really well for us.
Speaker Change: <unk> zero zero is just literally can't make enough of it.
Speaker Change: And.
Speaker Change: We've more than doubled the business in GB as well, that's really helping us I would say from a consumer standpoint, we broadened the consumer we still have the classic rugby labs, but we're also bringing more women into the franchise.
Speaker Change: And you know we're just we're just continuing what you know.
Speaker Change: Also from a marketing and experience I think the brand has done some really great social media, we've let kind of consumers take over some of the conversation about where's the best Pi poor.
Speaker Change: You know, which is if people really get into this.
Speaker Change: And so that's been really great and so what I do think it's sustainable as I think we have built.
Speaker Change: We've stayed very true to the liquid we stay true to the consumer while expanding that base and and look we just signed.
Speaker Change: Official sponsors of the primarily.
Speaker Change: And we're very excited about that we've got a great history with six nations.
Speaker Change: But of course, a premier league as it's quite a global audience and so we're excited about where that can take going forward.
Speaker Change: Great. Thank you. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you as a reminder, if you want to ask a question you can press star one on your telephone keypad.
Speaker Change: Please limit yourself to one question at this time thank you.
Celine <unk>: Our next question comes from Celine <unk> from Jpmorgan.
Speaker Change: So open please go ahead.
Celine <unk>: Yes, good morning, Brian.
Celine <unk>: Sorry, I have one question as my follow up. So my first question is just wanted to understand your clarification on you know akshay.
Celine <unk>: Are you hinting because you said that's grossly return when consumer confidence will be tunnel.
Speaker Change: So are you hinting to flat organic growth for fiscal year 'twenty five and we did that at what are the moving parts because I saw that your price mix, even though you mentioned was positive in the U S decelerated to 0.7% in the second half.
Speaker Change: Price mix too positive.
As you baked that into fiscal year 'twenty Fives, and then I think you also mentioned that organic EBIT margin will be in line for H, two which was down 100 basis points too is that as well.
Speaker Change: Base for fiscal year, 'twenty, five and within that could you elaborate a bit which regions.
Speaker Change: Driving this decline.
Speaker Change: And then my second question is really on the <unk> I think about the midterm outlook, where you are.
Speaker Change: You have not yet seen went to the Investor day.
Speaker Change: Demand will be Tom I mean, capex investment is quite seem to be cheap enough for several years as you have more than doubled your capex investment and you continue to invest in mezzanine inventory I want you to understand what kind of volume growth underpins these investments and.
Speaker Change: Your consumer insights.
Speaker Change: Program that just comes out rooting out how we should inform you in terms that the ph community caused us to structurally in terms of the weakening demand in for you. Thank you.
Speaker Change: Okay.
Speaker Change: I'll start with the first one on fiscal 'twenty five and.
Speaker Change: And a little bit about our guidance there look what what we're saying there is when the consumer environment improves.
Speaker Change: We will return to growth so.
Speaker Change: As far as where does that land is on the year. It really does depend upon when we start seeing.
Speaker Change: Some of these better trends on the on the consumer while we saw.
Speaker Change: Certainly exited the year with more momentum with our share gains the category and in the industry kind of more limped into the end of the end of the fiscal and so that's what we're pointing out. So you know whether it's going to be you know flat or above will will depend upon when that consumer environment improve.
Speaker Change: And so that's why we're kind of flagging that exit rate on the industry in the U S.
Speaker Change: <unk>.
Speaker Change: Look I think operating operating margins.
Speaker Change: Flagged also the negative pressure there.
Speaker Change: The pressure's coming from multiple places it really is about.
Speaker Change: You mentioned first of all North America our.
Speaker Change: North America price mix, we would expect to be positive.
Speaker Change: Part of what did impact us in the second half is remember these tequila numbers.
Speaker Change: But the hela numbers that we talked through the difference in the shipments versus the underlying consumer. So that's one that definitely negatively impact us as we had to lap.
That that tequila restocking from prior year, and so that's what's going on underneath that.
Speaker Change: So now moving on to margins the margins several things so the strategic investments that we made in the second half of the year will of course carryover into the first half.
Speaker Change: We talked about the digital investments that we're making and also some of the route to market.
Speaker Change: Investments that we've made as well.
Speaker Change: So that continues and by the way that that would have that would have hit some of our north American margins in the second half.
Speaker Change: We also.
Speaker Change: You know things like salary inflation, particularly in emerging markets.
Is another place, where we would expect that to continue to roll forward.
Speaker Change: You know also that pressure on the top line does impact our and particularly the pressure on the topline in Nam does impact our margins.
Speaker Change: It does impact our the leverage that we get with our cost structure. So that's why you know if if the year improve like you you do see that coming kind of ride along with them right along with growth. So you know.
Speaker Change: We are very focused on productivity and pricing to really offset inflation, but you know these are some of the mechanical things and the roll forwards et cetera that we're that we're seeing from the second half than the first half that were trying to flag.
Loving: I don't know if you would add anything to that loving it and I think you've covered it perfectly and then.
Speaker Change: On the mid term so for Capex I wanted to talk about a little bit of where our capex and it was this year and where it was.
Loving: Sure.
Speaker Change: I mean, when we think about our capex and mature and start looking to start with maturing stock maybe haven't come to capex maturing stocks. The way, we think about the investments we make in maturity buckets that you're looking at long term projected.
Speaker Change: Volume growth rates and this is based off of both looking at historic growth rates, but also laclede fall, but based on what you know what we see happening with the consumer and so these are not based on the next three years. So the next you know.
Speaker Change: Five years volume growth rate, but much loved the deal protections with volume growth.
Speaker Change: And you know the the way to think about it perhaps from a modeling perspective would be to the easiest way it would be sort of looking at historic volume growth space, which typically would have been a combination of population growth as well as the growth from.
Speaker Change: Movie consumers moving out to bid and wanted to split it and then the third is volume growth that you've got an emerging market that's GDP.
Speaker Change: And earnings 11th increase in these emerging market. So the combination of the see what really drives the maturing stock investments.
Speaker Change: On Capex.
Speaker Change: Michigan portion of our Capex investment this year was.
Speaker Change #100: But we had to announce so we started the construction of <unk>.
Speaker Change #100: Our second distillery or a second brooding for goodness in Ireland.
Speaker Change #100: And if you look at the growth rates that we've had on goodness this year.
Speaker Change #100: You can understand why we need to put in that investment and do this is an extremely asset light model and unlike like Columbia businesses. Most of our global Gyn as volume comes down to one one factory in Ireland, which we have now but the second one also to keep pace with the growth of Guinness Sito's Sito.
Speaker Change #100: So that's been a part of that the other the other projects that I would mention is with.
Speaker Change #100: Building out a new distillery for single malt Whiskey China.
Speaker Change #100: And you know that that's going to come that's we've just started to make request to put it to bottle salary and not going to see the benefits of that come through for many many years, but it could be delicious liquid I'm sure. When it comes out but again. The reason I mentioned this is because a lot of pop has the capital to invest.
Speaker Change #100: <unk>.
Speaker Change #100: Of this nature they had much more long term.
Speaker Change #100: Nature, and that's what's driving the capex growth.
Speaker Change #101: What we have guided to is that we do expect this level of Capex investment to stay on for fiscal 'twenty five in 20 States and then come back to more closer back down as a percentage of that next week back to historic levels after that.
Speaker Change #102: Oh, and then I think you have a final question.
Speaker Change #103: Consumer insights.
Speaker Change #103: And just.
Speaker Change #104: What we were doing around consumer insights and so yeah.
Speaker Change #105: Yeah look we are we are strengthening our and I mentioned this consumer choice framework. This is our proprietary network we are.
Speaker Change #105: Our network data. This is our proprietary data that we used to look at occasions and how those are growing around the world. Some of that we featured at our capital markets day.
Speaker Change #105: But we are taking it to all of our major markets.
That that will be in place really by the end of the calendar year, we will literally have it everywhere that we want it to be and that's enabling us to really.
Speaker Change #105: Identify these pockets of growth and actively move resources.
Speaker Change #105: And in this kind of volatile environment.
Speaker Change #105: It has been very important for us to get underneath and to be able to shift as appropriate.
Speaker Change #105: We have done that.
Speaker Change #105: In several places.
Speaker Change #105: Just to make sure that we're getting the right right A&P deployed in the right place the right liquid allocation put in the right place.
Speaker Change #105: And where we've decided to sort of invest in route to market and of course. This even goes down into our U S route to market changes as well.
Speaker Change #106: Thank you.
Mitch <unk>: Thank you. Our next question comes from Mitch <unk> from Deutsche Bank.
Speaker Change #108: Your line is now open. Please go ahead.
Speaker Change #108: Thanks.
Speaker Change #109: First question given you are retaining your five to seven medium term guidance.
Appreciate next shift goes a long way off but it sounds like fiscal 'twenty five is.
Speaker Change #110: Unlike keeps me back in that range can you.
Speaker Change #111: Give us your sense of confidence that perhaps fiscal 'twenty six could see within that range.
Speaker Change #112: Really other than the consumer changing is there anything you can do to get yourself back there and then as an add on for that my second question is it's obviously been a very challenging year for spirit is the category.
Speaker Change #113: And by the sounds of it has been getting more challenging as the year has progressed.
Speaker Change #114: What gives you the confidence that those challenges are cyclical and not structural.
Speaker Change #115: Your thought process around why you think things recover.
Speaker Change #116: Yeah, So let's talk a little bit about the medium term guidance and you know and we have flagged.
Speaker Change #117: Yes, certainly for fiscal 'twenty five mm given the current consumer environment, we're really focused on driving execution strengthening our resilience and market share in that when the consumer environment improves.
Speaker Change #117: We will return to growth and depending upon where that happens in the year you know that will be how we progress you know back.
Speaker Change #117: We do remain confident in the long term fundamentals.
Speaker Change #117: And do believe this is not structural but is more cyclical in near term in nature. If you think about what underpins the fundamentals of our medium term guidance the demographic trends, the rising incomes and developing world spirits, gaining share occasions from beer and wine the long standing trend of premium innovation.
Speaker Change #117: Walk through some of those in the U S, which you can continue to see that spirits, gaining share from beer and wine occasions, the long standing trend of premium innovation being there.
Speaker Change #117: See what's happening for us and in India.
Speaker Change #118: Some of our African markets on.
Speaker Change #118: On spirits growth.
Speaker Change #118: So.
Speaker Change #118: And then look demo trends I know theres been a lot of noise about Gen Z.
So let me talk about that for a second because actually as we look at Gen Z in the U S.
Speaker Change #119: And while they are reporting kind of higher preference for moderation were actually seen spirit's penetration up plus 3% and in fact, theyre more likely to purchase spirits, the millennials where at the same age.
Speaker Change #119: So we are seeing and look whether it's the our Tvs that are now spirits space that are bringing people into spirits earlier.
Speaker Change #119: But we really see the demo trends, we don't see that cutting against us, we really do see that supporting.
Speaker Change #119: The ongoing long term trends that we've seen.
And things like premium as Asian look we did see down trading in Europe, and in APAC, but you see where their price mix or price mix actually was.
Speaker Change #120: Was it was plus 4%.
Speaker Change #121: So you had a nice.
You know performance there on premium innovation within our portfolio, we can handle that within our broad portfolio, we were still able to get that despite what was happening. So that's some of the things that we can do to kind of.
Speaker Change #121: Pull forward on our own destiny and this is why.
Speaker Change #121: Yeah.
Speaker Change #121: I do believe our portfolio is positioned really well in the right categories.
Speaker Change #121: When you look at what is still growing it is tequila you know it is.
Speaker Change #121: Is.
Speaker Change #121: We're seeing pockets of whiskey also continuing to do well while there is some down trading in there we've got a nice broad portfolio that can catch people.
Speaker Change #121: So that's why we're really focused on this quality market share because that helps us outperform even in a.
Speaker Change #121: And a more pressured market.
But we do believe is long term fundamentals are there and and that this really will be much more about consumers and some of the volume pressure that we're feeling on consumers that look some of them still carried in maybe a little bit there drinking further down into their bar that maybe they had built up during COVID-19.
Speaker Change #121: Further we're getting away from this super cycle, and we're really into more of a normal cycle.
Speaker Change #121: Cycle.
Speaker Change #121: Are seeing consumers come back and and buying it's just they had they have their own inventory now you go into an economic pressure situation and and we are seeing.
Speaker Change #121: A little less volume than what you know.
Speaker Change #121: You would expect but don't forget the noise also that we have in some of the volume that will roll off.
Speaker Change #121: As we go forward.
Speaker Change #121:
Speaker Change #122: Whatever nine non address good very good thank you.
Speaker Change #121: Yeah.
Speaker Change #123: Thank you.
Speaker Change #123: Question comes from Olivier Nicolai from Goldman Sachs.
Speaker Change #124: Now open. Please go ahead.
Olivier Nicolai: Hi, Good morning day, Brian that Danielle.
Olivier Nicolai: Just a question on disposals, you sold a few noncore brands.
Speaker Change #126: Tissue, including some B assets I was wondering in Africa and more recently in Nigeria is that much more to do in terms of disposals of non core assets, which could ultimately boost the topline.
Speaker Change #127: For you guys you and also.
Speaker Change #128: To reduce the leverage is there more to do on spirits THAAD as it's more actually perhaps exiting a bit more.
Speaker Change #129: BMO, because youre not pick off for instance.
Speaker Change #130: And then in the context of <unk> you.
Speaker Change #131: Cvs is a path to reduce net.
Speaker Change #132: Net debt to EBITDA and potentially reinstate the share buyback in the future. Thank you.
Speaker Change #133: Yeah, I think you know, we've always been active portfolio managers, and and and look in particularly on Dennis We've had an asset light.
Speaker Change #133: Strategy for us.
Speaker Change #134: For handling that business as we as we move around the world. So we're quiet.
Speaker Change #134: We're quite happy with the disposals that we've made this year because it really just follow along.
Speaker Change #134: Trends that we're seeing we talked about a year ago about getting out of some of the kind of a more local and kind of mainstream spirits brand in India in it because we saw the premium innovation there.
Speaker Change #134: Well, we're convicted around that that that would continue to have that premium innovation journey. We continue to handle so we felt like it was the right time to get out and exit from some of those brands. Likewise, we see that in some of these.
Speaker Change #134: Disposals that we're doing in Europe, as well and then on on Africa, I mean, we do feel very good about.
Speaker Change #134: Area, because that's what that's doing is it's it really is helping us from a bottom line perspective, as well and just the volatility that you get in currencies there, but it's also going to help us continue to grow again as business because tolling ROM has this amazing distribution network that we can get to a lot more places than what we would have been <unk>.
Speaker Change #135: To do I'm working off of the brewery footprint that we had so disposals are a key piece of this and the noncore pieces of it of course, not going to comment on anything that we would necessarily be looking at going forward, but it is to say that we are active in.
Speaker Change #135: And taking a look at that and you know in doing what we need to do based on what were you know long term strategy.
Speaker Change #135: And it certainly does also help us on this walk back on on EBITDA and our capital allocation strategy remains unchanged.
Speaker Change #135: And when we have that excess capital, we will return that to shareholders.
Speaker Change #136: Thank you.
Matt: Thank you. Our next question comes from Matt <unk> from UBS. Your line is now open. Please go ahead. Good morning, Deborah in Lavonia a couple from me. Please firstly can you just going back to the U S. Please can you give us your take on the pricing environment, particularly in Tequila and whiskey, we are noticing.
Speaker Change #138: And then you tend to vacation or promotional activity. So just love to get your take on how you're navigating that with Chris Your brand portfolios and more specifically on tequila.
We've observed downgrading within <unk> over the last several quarters do you think that cyclical or structural.
Speaker Change #138: Yeah.
Speaker Change #139: Look on the pricing environment actually you know one of the things.
Speaker Change #139: As you are looking at that make sure you do tease out there.
Speaker Change #139: Ready to drink portfolio from sort of the rest of.
Speaker Change #139: Spirits because of.
Speaker Change #139: That is the most promoted part of the spirits category.
Speaker Change #139: And of course, there's been just a lot of competition come in there and so that's.
Speaker Change #139: That's still the area that we're seeing the most promotion in.
Speaker Change #139: That being said actually look from a tequila standpoint, there's been a lot of entrance. It certainly is competitive.
Speaker Change #139: But we would say that it's not necessarily people down trading as much as Super premium is the place where people are entering tequila. So remember the Hela category latest 12 months is still growing in this environment almost 7%.
Speaker Change #139: And by the way household penetration on Tequila is still two thirds of vodka. So it's got a long runway to go.
Speaker Change #139: Super premium plus.
Speaker Change #139: That's what that the heat of the category plus 12%, but ultra premium plus where we really play heavily is plus 3%.
Speaker Change #139: And we're gaining share and you know within that so it's not so much that people are down trading.
Speaker Change #139: Certainly the $100 plus type bottles that aspirational.
Speaker Change #140: 1942 on a Tuesday night that occasion is not but that we've really lap what we're seeing now is more about consumers coming into tequila from other things and theyre entering at that Super premium plus.
Speaker Change #140: Price points, so that's it.
Speaker Change #140: And to your point on Blanca Blanca was where there is the most active.
Speaker Change #140: Activity I think what we really like about our portfolio and the moat. We feel like we're we're kind of building, we actually have a very different tequila business from those.
Speaker Change #141: As an example, Don Julio two thirds of the brand is reconciled and above.
Speaker Change #141:
Speaker Change #141: You take the the direct competitor to Don Julio.
Speaker Change #142: That businesses is the opposite.
Speaker Change #143: Only only about a quarter is <unk> and above so.
Speaker Change #143: We actually feel like perhaps a meager it's 50 50 so.
Speaker Change #143: That's a bit more of a block of business, we've seen the price competition in that.
Speaker Change #143: But we still feel good about our total tequila portfolio and what we're doing.
And being able to drive the total portfolio.
And you know and and gained share so.
Speaker Change #143: That's kind of what we're seeing whiskey.
Speaker Change #143: Now whiskey environment, we're not we're not seeing.
Speaker Change #143: Okay.
Speaker Change #143: We're not bothered by anything we're seeing what we see seems to be quite.
Speaker Change #143: You know kind of normal activity for this time of year.
Speaker Change #143: You do have retailers that are as they're competing for traffic, sometimes retailers will do some things, but there's nothing that we're seeing in whiskey that we're concerned about.
Thank you.
Speaker Change #144: Thank you. Our next question comes from James Edward Jones of RBC.
Speaker Change #145: Your line is now open. Please go ahead.
Speaker Change #146: Good morning, Joe Good morning, Brian.
Speaker Change #146: A couple please first.
Speaker Change #148: You said the price mix is holding up okay in the U S.
Speaker Change #146: Bruce.
Speaker Change #149: I mean, it sounds like pricing.
Jos.
Speaker Change #150: So as the category leader have you considered just lowering prices overall and seeing what happens.
Bruce: I'm struck me.
Simon Hales: From Simon's question, you were saying, we cant assume a bounce back in luck for four years with <unk>.
Speaker Change #152: Turning toward last year.
Speaker Change #153: Appreciate it if you want to put out to a lot of distributors for quite a long time.
Speaker Change #154: She was subdued.
Speaker Change #155: Michigan Shouldnt that be some sort of bounce back for closing remarks.
Speaker Change #156: Yeah, So let them so we'll take the last one first.
Speaker Change #157: You know look at in Mexico in Q4, the industry was down 20%.
Speaker Change #157: So you know.
Speaker Change #157: So yes, we have we have destock, but you know to think even though it's lapping it was lapping kind of remember in the first half of the year we were down.
Speaker Change #157: In that in that range. It doesn't necessarily just mean, it's just going to whip back based on the consumer environment that we're seeing it.
Speaker Change #157: And so that's why we have flagged that so we're not saying that there won't be a bounce back and we certainly see that certain market, but but the Mexico. One is when I flag because it is our second largest market, but even in other places in south lack in other places we are definitely seeing just with the volatility in the region.
Speaker Change #157: It just didn't.
Speaker Change #158: I didn't want you to mechanically kind of dropped out in thinking that it'll be you know, it's it's done the consumer environment there.
Speaker Change #158: You know is quite volatile. So you would expect though our performance to more align with that consumer environment versus what we just a cycle and then.
Look lowering pricing.
Speaker Change #158: I mean look we've got Super premium brands and remember Super premium plus is what is driving the growth so what youre seeing or consumers.
Speaker Change #158: When they when they have the occasions that they want to consume spirit. They want the brands that they want and they want premium brands.
Speaker Change #158: So lowering price isn't isn't a Penn state by any means and look we're still very affordable luxury when you put it into perspective of other.
Speaker Change #158: Good this is still a great way and people do want to celebrate one of the things that even when sentiment has remained low.
Speaker Change #158: LOE in places people do want to go out and celebrate with their friends, there theyre doing more low tempo occasions.
Speaker Change #158: And these are places, where we know when we get it right.
Speaker Change #158: Where we're hitting it out of the park things like the Crown Royal Blackberry.
Speaker Change #158: You know that is that has brought people into whiskey and it is because it is.
Speaker Change #158: It's a great easy serve and it really captured People's imagination. So.
Speaker Change #158: Not just about lowering price.
Speaker Change #158: But one thing I will say I do think when I talked about the volume declines were mostly on in the category were mostly on vodka and rum those are the more.
Speaker Change #158: Standard and value priced parts of the portfolio and so they are most likely more sensitive and because of that you know that.
Speaker Change #158: That's what you see going on there and Thats why there is you know more of competitive activity there, but you see it is not coming out and net sales total gross so.
Speaker Change #158: Hopefully that answers your question.
Speaker Change #158: Okay.
Thank you. Our next question comes from Laurence <unk>.
Barclays. Your line is now open. Please go ahead.
Laurence: Good morning, everyone. Thanks, very much for the questions a couple on your key brands.
Laurence: Now the best is despite on the Uda is doing pretty well you mentioned a couple of reasons earlier in the call, which was just not having quite so much in the higher end.
Speaker Change #160: Do you think is a.
Speaker Change #161: The problem with the brands now that its got so big and we sort of hear a bit more about consumers getting fatigued with.
Celebrity Takeda is all about the customer if there is no having that sort of ultra premium line extensions do you think this possibility. The company you guys sort of got as big as it kind of it gets and we shouldn't really expect too much growth.
Speaker Change #161: And then similarly in China, you've actually got some very strong success with Shui Jing Fang.
Speaker Change #162: But of course, many your peers are reporting much weaker results from China and international groups do you think there's any sort of structural change in China, that's causing consumers to want to drink more domestic you've made spirits as opposed to international. Thank you very much.
Speaker Change #163: Yeah. Thanks, So look on <unk> has been on quite a tear for the last several years as you know we flagged in there it's been a plus 70% growth CAGR.
Speaker Change #162:
Speaker Change #162: But it is a newer brand in one of the things that as we've uncovered on it. So first of all it is structurally we're in more Blanco. There is more competition, there, but that being said, we're still growing in on premise and on premises where brands get.
Speaker Change #162: This is growing and on premises where people first tri brands.
In this industry and so we actually feel great about the runway for cost Amigos.
Speaker Change #162: We still have various states quite fascinating and when you start to have the footprint and this is what's nice about having as broad of a portfolio that we have and in the killer because we can see opportunities for cost amigos, yet in several states, where we're actually under shared.
Speaker Change #162: And what's interesting about the brand is the brand awareness is two thirds of what Don Julio and and other competitors.
Speaker Change #162: So it's it's a big opportunity for us for fiscal 'twenty five we've made the announcement, we are fully integrating <unk> into our <unk> dedicated sales.
Speaker Change #162: Sales Division and we're excited about this because we can put more feet on the street against this brand and bring the full power of the ico bring in all the advanced analytics.
Speaker Change #164: The the RG M and.
Speaker Change #164: And so we see customers, having a huge future it's a really nice.
Speaker Change #165: It's a great liquid for if you don't know if youre going to like the Hela you try costume egos and you're like Wow I like to Hela, it's very different and complementary to Don Julio. So we still feel great. There's a lot of people to get bring in to cost him. He goes.
Speaker Change #166: On China, Yes, we did post.
Speaker Change #167: Plus 12% and it was driven by S. J F.
Speaker Change #168: We also saw pressure on our our.
Speaker Change #169: You know whiskey business in our imported Scotch within that those singleton actually our malt business, we have plus 12% on Singleton.
Speaker Change #169: So felt really good there and part of that we saw some trade down, but it's like you're going from singles in 'twenty. One the singles in 15. So it is still a really nice.
Speaker Change #170: Price mix for us, it's trade down, but it's it's still affordable and it's a great value. So we're.
Speaker Change #170: We're not seeing anything structural there other than.
Speaker Change #170: China really still hasn't fully recovered from Covid haven't seen the bounce back there that we saw in other markets around the world. So.
Speaker Change #170:
Speaker Change #171: We're kind of still waiting to see that and to see a little more confidence from the the Chinese consumer Love and you mentioned earlier the the local whiskey.
Speaker Change #171: Hillary that we're building we're excited about the opportunity on that so more to come in that space, but.
Speaker Change #171: China for US we're still underdeveloped you know net net it's it's an opportunity for us.
Speaker Change #171: Thanks.
Speaker Change #171: Yeah.
Speaker Change #172: Thank you.
Speaker Change #172: Next question comes from Sarah Simon of Morgan Stanley.
Your line is now open. Please go ahead.
Sarah Simon: Yes, Hi, I've got two questions. Please first one was on Guinness of C. You've benefited from quite a bit of price in fiscal 'twenty full can.
Sarah Simon: Can you give us an idea what kind of pricing, we should expect for <unk> in 2025.
Speaker Change #174: Then the second one was more about the kind of structural take your point about Gen Z being more likely to drink spirits and so on but what about what have you. What do you think in terms of volumes because you know anecdotally. It would appear that people are just trying to scale back volumes.
Speaker Change #174: Across the board. So if everybody does that is the fact that gen Z might be a bit more spirits inclined still enough.
Speaker Change #175: To kind of offset that thanks.
Speaker Change #176: Yeah, I mean look well, we're not going to flag any any forward kind of pricing.
Speaker Change #177: Information I mean, we were very thoughtful and disciplined about how we do pricing.
Speaker Change #177: And you know and some of the pricing that we've done has really been around the inflationary environment that we've been in and needing to you know to handle that and particularly remember.
Speaker Change #178: Get a being a.
Speaker Change #178: Very focused in on Europe, and we've had some particularly high inflation in Europe over the past.
Speaker Change #178: Year, so, but look we are seeing inflation start to come down so.
Speaker Change #178: That's all I'll say about pricing.
Speaker Change #178: And then as far as.
Speaker Change #178: Your question is around structural and kind of volumes.
Speaker Change #178: Yes.
Speaker Change #179: Look what we've what we've always said if people want to drink better not more and so there's there's part of it that plays into the premium innovation journey, I think as well I flagged that spending is actually in line friction the inline with prior generation, but of course, you're getting less for those dollars. So I don't think it's a generational issue I think it is.
Speaker Change #179: More it's that same economic pressure that everyone's feeling.
Speaker Change #179: In the U S. The student loan repayments, having to resume in some of this this puts you know pressure and wallets.
Speaker Change #179: You know across the generation so theres no.
Speaker Change #180: I would attribute some of that more to what's happening in the economy and how people are feeling and in particular young people are feeling.
Speaker Change #180: Pressure on their wallets so.
Speaker Change #180: I don't think there's really anything else I would point to at this point you can certainly explain what we're seeing based on the economy and and that is the more cyclical things versus structural.
Speaker Change #180: Thanks.
Speaker Change #181: Thank you. Our next question comes from Jeremy If Bianca.
Speaker Change #181: HSBC.
Speaker Change #182: Your line is now open. Please go ahead.
Speaker Change #183: Hi, there thanks for taking the questions for me first one is just following up on James's question can you tell us.
Speaker Change #184: The exit rate was off eight to sellout.
Speaker Change #184: Would you just take it from the overall regional perspective, and then the second question is on innovation.
Speaker Change #185: You did well with the crown Royal Blackberry, but perhaps you could talk about how some of the others.
Speaker Change #186: <unk> landed.
Speaker Change #187: I guess, particularly North America.
Speaker Change #188: How do you see innovation pipeline shaping up for fiscal 'twenty five.
Speaker Change #188: Okay.
Speaker Change #188: Size it relative.
Speaker Change #188: As to what it was in fiscal 'twenty four.
Speaker Change #188: Yeah, so on the <unk>.
Speaker Change #189: Exit rates for Latin America.
Speaker Change #190: I mean look this is this is a mistake, we're not going to make again part of as we're looking at the kind of go forward. We're looking at what we're seeing and projecting going forward versus just taking a look a backward look because that that is one of the things that has gotten us into trouble one of the things that we see is when the market drops off it dropped off.
Speaker Change #190: Quite fast.
Speaker Change #190: And so and remember some of these markets like Mexico are quite tied into also the interest rate environment and things like the U S. So there's a lot of factors that plan as we look forward there.
Speaker Change #190: What we what we have flagged as the exit rate for for Mexico.
Speaker Change #190: You know that Q4, the industry was down.
Speaker Change #190: 20%, So you know.
That you can expect look Brazil is a different case, Brazil actually had a flat category and we were gaining share on that so.
Speaker Change #190: And that's our largest market. So there is some positive news there, but then when you go into and to like South Black we are seeing some volatility there.
Speaker Change #190: It really is quite different.
Speaker Change #191: I wouldn't be doing them I wouldnt be helping you to give you some kind of regional averaged them on innovation look on innovation, we actually had a very strong year and that's really one of the things that has helped us I didn't really pick up share momentum in North America that with the Costco collection, which we talked to you.
Speaker Change #192: At our capital markets day, and then kind of rolled out right around the holidays. This.
Speaker Change #191: This year we.
Speaker Change #191: Continue to.
Speaker Change #191: Expand distribution there by the way, there's still more distribution opportunities on that it's growing three times faster than the industry, our convenience portfolio kind of all all in so that would be the cans plus the.
Speaker Change #191: Plus what we've been doing on these more ready to serve the multi serve shake kind of core and serve type of product plus 15%. So so that certainly helped us.
Speaker Change #191:
Speaker Change #191: Also had really nice innovation on bullet with the American single malt the ride 12 year old launches.
Speaker Change #191: So that showed up in some.
Speaker Change #191: In bullet as well.
Speaker Change #191: Buchanan's is continue to do well off its off the pineapple and financials really in its second year I mean, one of the things we're trying to do with our innovation is we're really trying to have innovation that is.
Speaker Change #191: You know not so not for short cycle really bringing in a new buyers. It's one of the reasons, we've kind of held it on the crown Blackberry lot of new new buyers into the franchise also new whiskey.
Speaker Change #193: So we're really part of its consumer insights and getting in and making sure you have incremental occasions, it's what's helping us pair with food is what's helping us.
Speaker Change #194: For moderation for convenience and some of these underlying consumer trends you know going against that delivering the right product and we are seeing great results for that so we've got a great pipeline coming up as well.
Speaker Change #195: Were actually extending on cocktail collection, we're gonna have a crown variant coming out.
Speaker Change #195: And sort of more to come on that as we move through the year, We'll tell you more about our innovation pipeline as we announce that.
Speaker Change #195: <unk>.
Speaker Change #195: Thank you.
Speaker Change #196: Question comes from a Fintech lawn from Goodbody. Your line is now open. Please go ahead.
Deborah pneumonia: Good morning, Deborah pneumonia two questions from me. Please firstly I guess big picture just in terms of your marketing spend I. Appreciate that you pulled back some of the spending in the second half of the year, but for the year as a whole marketing spend was down about 15 basis points headwind to group margins give.
Speaker Change #198: Given that you're now expecting the industry to be softer for longer.
Speaker Change #199: Should we think about this marketing spend going forward notwithstanding.
Speaker Change #200: Primarily sponsorship.
Speaker Change #201: Is there a situation where our marketing could be a tailwind to margin.
Speaker Change #202: Margins in the short term, while we sort of retrenching a bit if the industry is going to be a bit softer.
Then secondly, just in terms of the.
Speaker Change #202: The route to market changes within France from Tomorrow.
Speaker Change #203: The relationship there you gave us a sense of what that will do in terms of your operations.
Speaker Change #203: Western Europe as a whole.
Speaker Change #204: Or is there potential for you to change your structure with smaller Hennessy in China.
Speaker Change #205: So, yes, you're going to marketing spend first I mean, we've always said, we don't manage to a specific rate.
Speaker Change #206: So we really do look at the returns of what we were doing what were doing and then when we're not getting as much of a return from it we do pull back money when we get a great return from it where we're doubling down and then Theres a few what I would call quite strategic kind of A&P investments that we view with a little bit longer time.
Speaker Change #206: Horizon, but even there when things aren't working where.
Speaker Change #206: We're constantly optimizing on that and we've got great tools, we've talked in the past about tools like catalyst sensor. We're also adding in.
Speaker Change #207: Virtual virtual create hubs, where we can.
Speaker Change #208: We actually can make and produce content much cheaper than where we're finding some of that productivity that I flagged the $700 million actually came from marketing. So we're able to spend the same amount of dollars and go farther so it does speak to you know to your point we.
Speaker Change #208: We are finding ways to make our dollar stretch we are looking at the current environment and adjusting accordingly, and that's why you saw us pull back on marketing.
Speaker Change #208: In certain places.
Speaker Change #208: And then spend than others, but.
Speaker Change #208: We're not managing that too to a rate where we're looking at where the opportunities are but we are actively managing that and we're well aware of the environment.
Speaker Change #208:
Speaker Change #208: On the route to market.
Speaker Change #208: For for France, and MHC.
Speaker Change #208: Look we said we saw a great opportunity, we have relatively low market share in France, and yet it took rate with.
Speaker Change #208: With key market. So we saw an opportunity and announced earlier in the year.
Speaker Change #208: That we were going to be setting up our own.
Speaker Change #208: Demand kind of marketing.
Speaker Change #208: Unit within the commercial organization within France, and then of course, we recently made the announcement, we're going ahead, and bringing all of our brands and and and we're quite excited about it and we see a great opportunity. It does not impact any of our other JV that we have.
Speaker Change #208: With moet Hennessy around the world nor does it.
Speaker Change #209: <unk> of our overall shareholding, we do we just make these decisions on a market by market basis, and we've seen an opportunity in France that we thought we could capitalize them with our own resources. So.
Speaker Change #209: Hopefully that answers your question I do think we are out of time.
Speaker Change #210: So I want to thank everyone for joining us today and for your interest and the Ico. Thank you.
Speaker Change #210: Thank you for joining today's call you may now disconnect your lines.