The Fresh Market (NASDAQ:TFM)
Goldman Sachs 2012 Global Retailing Conference
September 05, 2012 03:00 PM ET
Craig Carlock - President and CEO
Lisa Klinger - CFO
Good afternoon everyone. I am Steven (inaudible) on the food and retail analyst at Goldman Sachs. And we're very excited to have Fresh Market which is one of the highest growth concept markets in retail at the conference. As it grows from 124 stores today to over 500 longer term. The recent combination of accelerating low to mid teen square footage growth, consistent mid to high single digit comp growth and operating margin expansion as powered 30% plus EPS growth year to date. To better shed light on what differentiates the Fresh Market from its peers to create this opportunity we're pleased to host Craig Carlock, President and CEO and Lisa Klinger EVP and CFO.
Thank you Steven. Hello everyone. Lisa and I are very excited to be here with you today. Like to talk you about the Fresh Market. [Audio Gap] For the reason that we're so confident that we can grow is because we've been growing for many, many years. We have a history of sales and profit growth, there's just no doubt about that. I think these charts tell quite an exciting story, if you take a look at them. On the top left you can see we've grown units, 10% the last five years and I would say we slowed down our unit growth in 2008 and 2009 so that five year growth rate of 10% compounded includes two slow years. We've growing sales by 11%, the sales have grown faster than units and we've built units and built sales. We've growing profits much faster than that. You see we have an adjusted EBITDA that's grown by 20% and operating income that's grown by 23% per year over those five years.
Now we're very pleased with the growth and the financial performance of the business and growth is part of the company, I will tell you is part of the culture, is part of what we talk about, plan for and prepare for and then if you catch the graph, catch the second quarter, you see we've got 21% sales growth and 31%. So great five year trends and then really fast growth versus first and second quarter of this year.
Now let`s talk about the industry we compete in and the demographics. We're very excited to compete in the $1 trillion food industry. This is a very large and stable industry. So while we are high growth retail, we compete in a large stable industry. Second point I would like to make about the industry is that there are trends within the industry that are going to benefit us. And are going to provide a very nice tailwind. These trends include healthy, fresh, regionally sourced, locally sourced all of those trends absolutely work in our favor. When people have questions related to health, fresh, local, regional, we're the kind of store they turn to for answers.
Point on our customer demographics. Our customers represent a highly desirably demographic. Our customers appreciate quality. They are less driven by price. They tend to be well educated. They like to entertain and they are skewed towards higher income. Now while that's all true. If you go to one of our stores, you'll see a broad cross section of people because there are things in the store that appeal to anyone who enjoys food. So this is a very powerful combination that works in our favor. Great customer demographics and consumer trends coming our way.
Talk for a minute about the stores. We think people come to the stores for three reasons. The first is great food quality, the second is superior customer service and the third is the neighbor grocery atmosphere. We work extremely hard to source great tasting food weather it's an especially sweet pineapple or cooked shrimp, stakes (inaudible) for tenderness. If you are to walk around the store, you'll find meaningfully different and better food tasting products.
Top lining the food is service and for us the service involves an engaging store experience. We've got dark tile floors, soft lightening, we play classical music, we sample coffee, we carry groceries to customers' cars. Quite honestly, we don't think you can find this food shopping experience anywhere else.
If you look at this diagram, you can see the categories where we compete. If you look at the perimeter, you see the perishable categories, that's where the produce, the meat, the sea food, daily, bakery are, prepared foods. We round out the customer shopping experience in the interior of the store with dry packaged grocery items, book, coffee, candy, beer and wine.
Finally and this is very important. We point out what you don't see. You don't see aisle after aisle of low margin commodity staple items. We make our biggest statements in the perishable categories, that's where we compete. That's where the higher margins are, is in the perishable categories.
We're often asked about how we set our prices, so let`s talk a little bit about pricing. We are committed to providing fair and reasonable prices. I think that's what you hear a lot of people say but I may not want to say our prices are structured to build trust. We're trying to build a coast to coast retailer and we're going to have prices that in general trust between us and our customers. When a customer comes into the store, quite honestly, we're looking for relationship not a transaction. That's how we train our managers. That's how we train our (inaudible), how we talk to ourselves, is we're trying to build a relationship and that's how we set our prices. So let`s talk about a little bit.
Where we have overlapped with conventional food retailers and again, aren't that many categories that overlap directly with conventional food retailers, the staple items like milk, flower, sugar, we want to price very, very competitively. Where we have better products in the perishable food categories, we want to price commensurate with the quality that we're providing. So that's how we approach price and value.
An important point in understanding how we compete and we're distinct from other retailers is that we're committed to central operating philosophy and practices. Here's what we mean. We're talking about sourcing, distribution, merchandising layouts, inventory and ordering tools, training. All of these things are administered and developed centrally. This leads to great deal of consistency. This leads to geographic consistency. This leads to better predictability of financial results. This leads to consistency across store managers. So we might have experienced store managers or in a growth company we have quite a few new stores managers, folks who are newly promoted. We've got great consistency because of the central practices. As we grow from 124 stores to 200 stores and then from 200 stores to 300 stores, it's this consistency of our practices that gives us the great confidence that we can replicate and replicate and replicate.
Let`s talk about how we want to grow. We want to grow three ways. We want to grow by expanding our store base. We want to drive our same store sales and we want to increase our already attractive operating margins. The light space is easy to space on the chart. When we were preparing for our initial public offering in 2010, we hired the Buxton Company to provide an independent third party analysis of the white space, a lot of companies use Buxton and their analysis suggested that country can hold at least 500 fresh market stores. We did our own analysis, came up also a number of at least 500. So we've got 124 today, sort of about 25% saturation. We're targeting mid-teens unit growth expansion. We'd be very happy with 15% or so unit growth expansion year-after-year. For this year, we're targeting 14 to 16 store openings and we've opened 11 so far. We've opened in three new states including Kansas, Oklahoma and New Hampshire and we anticipate opening in California later in this year.
Another point about the real estate expansion is that we have a small box, 20,000 square feet and this box provides for a great deal of flexibility for us. When we go into any number of configurations, we can go into stores that are narrow and deep, we call those bowling alleys, we go into stores that are wide and shallow, we call them tennis courts. We can go into new construction, we can go into second generation, we can go in line, we can go out parcel. There's a great deal of flexibility we have to take advantage of real estate because our box size is so small.
Right now in this real estate marketplace, we're seeing great opportunities, we're getting great looks. We've got teams on the floor across the country looking for stores, we're getting great looks and we're getting terms that are agreeable and we're able to feel very bullish about our ability to continue to get good returns on the capital we're putting into the new stores.
Let`s talk about a couple of case studies. I think these are interesting. The first one on the top left is coconut grove with an urban area in Miami, very high population density. It's an old airplane hangar from Pan Am, that's actually a protected building. Quite one of our best performing stores, extremely exciting, very urban, lots of high rise buildings all around it. Beneath that one is (inaudible) North Carolina. This store opened in 1983, was remodeled in 2009. That's what we typically do, is remodel our stores after we do, we got a 15 to 20% sales lift. And you can count on us to remodel one to two stores a year.
Indianapolis, Indiana, this is a mid-town location open in 2008. We were actually replaced in old grocery store, the community petitioned us, to come and wind chuck that deal grocery store and sure enough it was a good location. We renovated the building and we've had great success in Indianapolis.
Westport, Connecticut is another form of grocery store. We went in behind, have an old line grocer, went in there, it's been a very, very good opening. We're competing very well in the northeast. We've had in New York City major metro area.
Look at this, we've got Miami, we've got the Deep South, we've got mid-west, we've got the north east. So what's exciting about this to us is the people around the country appreciate good food and good service and a nice environment in which to shop. While these buildings look different, I can tell you the experience that we provide inside is remarkably similar and suggests to us the concept is quite portable.
Okay that's the first one we're talking about growing. The second way is same store sales. Same store sales for us is primarily in my view executions. When folks come in to a fresh mark, they need to have a great shopping experience. We need to have fresh food it needs to be clean, there needs to be short lines, people wanted to be greeted. We need to deliver on those things and those are the way we generally get improvements in our same store sales. We also need to bring out new products. We consistently push ourselves and our merchants and our vendors come up with new and exciting products. And so we want to be on top of consumer trends, bring our new products and that we work very diligently to understand our promotion and so we study very, very rigorously, promotions this year, last year, and make good comparisons, good adjustments. So we're executing, bringing in new products and we're pretty diligently in our analysis.
And then finally, the third way we want to grow our profits is to improve our margins. I think we have a great history of doing this and really we're excited about our ability to continue to this in the future but the folks who grow food and produce food, what we do, we try very hard to negotiate lower unit costs with those folks. So as we're growing our business, we're buying more and more from our vendors and we're asking them to pass on some of the efficient they must surely be realizing to us. And we're working very hard to improve the efficiency of the trucks, to go into the distribution centers. So we try to fill up the tricks more and more. We're also getting efficiencies within the distribution centers. So although we outsource distribution, we're very aware of the kind of volume we're running through and we get lower handling costs because we're running more cases through there and then we get savings on outbound freights. So there's any number of ways that we can build our margins. So that's just one way that I think about the scale. So the growers and producers of food, shipping the food, warehousing the food, getting savings on all those.
We're also getting savings through systems. We've got great systems that we've developed in-house for property systems to help us manage shrink and help us manage ordering and inventory levels. We have a lot of new folks, because we are growing and these systems provide for great consistency as I mentioned across the stores and part of that consistency financially is that they are ordering the appropriate amount.
And then finally, we are studying very hard the merchandising, promotional mix not just to get the sales but also to make sure we're merchandising at levels that create the right balance of sales and gross margin dollars.
So those are the three ways we're going to grow. We're going to grow our units, we're going to grow our same store sales, we're going to continue to build our margins. And I'm going to turn this over to Lisa and she'll talk about our financial results.
Great, thanks Craig. As we've mentioned, we have a long and successful track record of the fresh market. We've experienced 11% topline growth for the past five years. This is driven by 10% increase in our store based plus positive comp store sales during an arguably tough economic cycle. While the average unit growth has only been 10% over the past five years, as Craig mentioned, we did purposely slow down our new store development during the economic downturn. And our more recent quarterly expansion plans, that gives us great confidence to return to that mid-teens growth target.
Now if you can focus on the chart on the top right hand side of the page, you can see that despite the economic downturn in 2008 and 2009, we actually performed quite well over this period. The only time period in the company's history in which we experienced negative comp store sales was a 15 month time period that stands across 2008 and 2009. You can see that we regained our momentum in the back half of 2009 and last quarter marked our 11th consecutive quarter of 4% comp or higher.
In the two year stack rate from our most recent second quarter, was 12.6%. This is slightly better than the first quarter two year stack rate of 12.3%.
Now looking at margins, our gross margin rate has expanded 260 basis points over the past five years and we continue to believe that there are numerous opportunities ahead of us to continue to drive margin increases. This expansion was achieved through sustainable growth drivers such as economies of scale, purchasing power and strength management that Craig just mentioned and those are the sorts improvements that you never get back. They just become part of your baseline that you continue to build upon those which is exactly what we've done as you can see by the chart on the top left.
In the most recent quarter, we did expand our gross margin rate by approximately 140 basis point versus the corresponding period in 2011. Additionally, we've achieved approximately 30 basis points of SG&A leverage during the past five years. However in 2011, we did incur new public company cost in the expanse associated with a secondary public offering. So adjusted for those costs which was a 30 basis point drag on the SG&A rate, SG&A leverage is actually on a comparable basis 60 basis better over this five year time horizon. You’ve seen our most recent second quarter that we did deleverage S&G&A by 100 basis points and this was primarily due to several distinct items such as the transaction expenses associated with our secondary offering in June. We did have some of that legal settlement payment and we did have some incremental public company costs.
We do expect however to continue to improve our SG&A expense ratio and over the next several years, we will look for that to add to our operating margin expansion. If we haven't said it enough already, we are a growth company. We believe that a conservative level of leverage is prudent. As a CFO, I feel very good about our financial position. We have a high quality balance sheet. We have ample liquidity dispositioning that's very well for our future growth. We have about $117 million of borrowing availability underneath our revolving credit facility and we also have an additional $75 million accordion with that facility. We currently have that leverage of 0.3 times.
Clearly our new store program is a big part of our growth strategy. As Craig articulated, we operate a small mass format that typically requires about $3 to $4 million of investment per store and this is for a build to suit project for an as is deal that's cost are typically 500,000 to a $1 million more but could vary greatly depending on the project. Given the current development market and what we're continuing to see is that a majority of our deals are going to be on the as-is side of the fence here and we don't expect any significant shift in that mix any time soon.
Our stores are actually able to reach the comp average very quickly. They typically start off at 80 to 90% productivity in our first year of operation. This new store growth model typically generates a four wall EBITDA margin that gets to mid-teen, five year five and a cash on cash return on investment that exceeds 100% by year three so a three year payback.
Just to give the group an idea on our current real estate pipeline. During the second quarter, we opened five stores and we added the states of Kansas, Oklahoma and New Hampshire to our existing sort of plant. We are currently on track for our 14 to 16 new stores that we will open this fiscal year. Our announced pipeline that we shared on our August 29, earnings call was for a total of 16 leases or owned properties that are in our new store development pipeline for stores that will open in fiscal 2012 or later.
Just to provide a quick synopsis of our second quarter performance. We had a great second quarter of fiscal 2012 for the second quarter sales grew 20.6%, gross profit dullards increased 25.6% and we grew our earnings per share adjusted for the fiscal 2012 equity earnings offering costs 31.1%. Additionally over the past year, we've paid down approximately $30 million of debt while ramping up our new store development pipeline and incurring several million dollars of incremental public company costs.
Last but not least, I just wanted to remind the group what our current fiscal 2012 guidance is. On the real estate front, we are likely to open 14 to 16 new stores and we expect to relocate one store. We are anticipating comp sales growth for the year to increase 5.5 to 6.5% and our operating margin and forecast improved 30 to 50 basis points over last year's rate of 7.5%. These estimates will yield annual diluted earnings per share in the $1.33 to $1.38 range.
Finally, we're planning on spending between $95 and $105 million in capital expense this year.
So to wrap up, we are differentiated through retailer with a strong gross profile and impressive opportunities for further operating margin expansion. I hope that we've been able to convey our passionate commitment for the business and thank you for your time and interest in the company. And I think now we'll turn over to Steven for some questions.
Great, thanks Craig and Lisa. Maybe we'll start off with the same three questions we've been asking all the retailers here today. And the first just as you think about the environment in the back half of the year relative to your second quarter results, what are you planning for and then also what's your early read on 2013?
We're just planning for things to be very stable and in line with what we've been seeing. We're not expecting a big change in economic conditions. We've got our guidance for the year, we stand by that and then as far as 2013, we haven't announced anything but we're trying to grow units to mid-teens, we're trying grow same store sales, mid-single digits and profits north of 20%. So nothing's happened to change, how we would think about that.
And one of the things maybe to add is that at the end of the day we are a stewed retail business, so we're certainly a little bit less impacted by broad plains in the economies or trends in the consumer. We tend to be a much more stable business.
Great, and then as you think about capital allocation, you referenced growth. But maybe talk about how you think about CapEx over the next few years, whether that's going to grow higher or there's opportunity to reduce it per store?
I think for us, most of our capital, call it 90% or more of our capital spent on new store construction, so as we build more stores, we would expect to spend more capital. In total per year, cost I think it will be pretty stable, its largely a function of as this deal versus new construction right now we're getting more at this deal. So no big change coming.
And then in terms of managing debt levels going forward, is there a specific metric that you want to keep yourself to as you expend?
I wouldn’t say that there is a specific metric or ratio that we're looking at. Again, we want to make sure that we have enough financial flexibility to be able to access to capital markets for any growth that we need. If we needed to fund all of our capital, if we don't generate any operating income, again, we'll be looking for $95 million of borrowing. We have 117 availability with another $75 million accordion. So we feel very good about the financial flexibility that we have right now.
Okay then, as it relates to the upcoming election fiscal clip. Maybe you can talk about any consequences to consumer that you're planning from these.
I think our job is to manage the company regardless of the economic or political environment the best we can regardless of the conditions, so no comment really.
Yes, we can kind of laugh and say people are probably (inaudible) your stake on Saturday, whether Mitt Romney or Barrack Obama win the election.
And we'll open it up for questions, let people have them. And then I'm going to quick it up with as you think about your differences versus conventional, maybe you can highlight where you're different versus other specialty and maybe you're going to relate that as you move into California specifically where there is a lot of specialty players like nugget markets, (inaudible).
I think there are a number of specialty competitors and I think each one of us is distinct. I think the most common comparison that people outside our company, frankly inside the company make as a comparison with whole foods, I think the severances if you're not familiar with the two concepts, they are absolutely committed to organic and natural customer who wants to live and organic and natural life style, I think will be more likely to shop within them. We're going to get folks who have committed a great tasting food though our store is a little smaller, it's easier to get in and get out. We're going to emphasize perishables, a lot of people will shop at both stores, perhaps one some place they go on Saturday, another one is closer to where they work to pick up something on the way home. So we overlap our customers. We have differences.
Another comparison point might be Trader Joe's and the thing there is we're almost complements with Trader Joe's. Trader Joe's does a great job in the non-perishable categories and so we're emphasizing (inaudible) sea food deli produce. And so we're actually emphasizing the categories that they don't and they are emphasizing categories that we would contemplate being right next to them where that opportunity to come along.
And then Sprouts and Henry's are California based concepts that do a great job but they target a different price point and they emphasize produce quite a bit more than we do. A lot of their sales are in produce. I don't know the percentage but I won't be surprised if its half their sales, it's not that high for us. And they target different specification of the product and a different price point.
So while the specialty marketplace seems to be getting more competitive I would say two things, there are distinctions amongst the specialty competitors and I would say that probably all of those feel like we're share takers under the conventional food retailers are probably fair givers and so we feel like there is ample room.
On CapEx, since its customary in food retailing that renovate existing stores every five to seven years in fresh markets only renovating, one to two stores every year. Why wouldn’t we want to assume that fresh markets postponing a meaningful amount of CapEx given such a low number of existing stores are being renovating every year and I asking this as a shareholder.
Sure, our fleet probably averages six year old. So it’s a new fleet. I absolutely do not want to convey that we're deferring CapEx. We tend to renovate one to two, like the Ashville store. We also tend to relocate which I didn’t mention or probably should have one to two stores. So this year we're going to relocate our Spartanburg, South Carolina store for instance. So we're absolutely committed to keeping the store fleet fresh. There are ample examples of companies of that didn’t keep their fleet fresh and they suffered for it.
And in our initial term of our lease is typical ten years and so that's really the point as time when we make that decision, is it a remodel or is it a relocation and so we've done that consistently for the past 30 years which is why the fleet still is relatively young as Craig average of about six years old.
How many of your stores are west of the Mississippi now? How many of the 16 new stores in the pipeline are in California, let`s say or West of the Mississippi.
So of the 14 to 16 we hoped to open this year, one is west of Mississippi. We probably have four west of the Mississippi right now. Of the 16 are now we put in document, we're three total in California.
And so how are the store economics going to work for those stores given the higher distribution expenses in terms of the three year payback period that you mentioned?
The distribution expenses aren't as much as higher as they might say. We've done several things to mitigate what might seem like higher transportation costs. Just to be clear, the cost growing the food is the same, the cost of shipping to our warehouse in Atlanta is the same, the cost of handling the food in the warehouse is the same. So we're talking about one level of freight that might be different. For instance the Wichita store which is among the further rest from our Atlanta warehouse is kind of interesting. We have the same concern, maybe the freight will be a little bit high and then it looks like the productivity. We actually arranged the back haul of our beef that we buy from the mid-west. So we're actually coming out net come a bit better having the Wichita store because we're able to bring beef back to the Atlanta warehouse on its way back from dropping of Wichita.
So we're able to do things like that to mitigate difference in distribution costs. In California specifically, we're able to source quite a few things that never to have to make to the east coast, a prime example, an easy example would be produce. While a produce is growing in California, so it never has to make it back to the east. So yes, some things are going to cost a little more. Some things are going to cost a little less. We're also experimenting, testing two deliveries a week. Part of our stores on the east coast receives free; we're trying to find a way to deal with two. We're also finding some of our suppliers have west coast distribution centers so we're able to buy things that in addition to produce that come from the west. So its way too soon to say or feel like or believe that there is going to be higher cost net net, so to say with those stores.
You indicated that your information systems to date have been home grown, internally developed, I caught that.
Our inventory ordering tools are home grown, proprietary might be how we call them.
Yes, the rest of our system infrastructure are all basic standard platforms that [Multiple Speakers].
What I am talking about is, in the past, people often say, how come your margins are high and the answer is simple. It is very difficult the get the right amount of perishable food into the right store on the right day of the week. And so, if we have five apples and three customers and we throw two apples away, we're going to lose more on the two we throw away than we'll ever make on the three we sell. Similarly, if we have five customers and three apples, we're going to turn away two customers never to see them again. And so having the right amount of perishable food and the right , so and we put together tools and algorithms that help our stores order the right amount of food and that's what I am referring.
So you think you have a competitive advantage with the proprietary systems that you’ve developed?
I think so and I think the data would bear that out.
And so maybe we'll go back to some of the opportunities in terms of top line. As we look back at your history, the fresh market comp consistently in the 7 to 8% range actually in 2005 and 2006. Is there anything different in the current environment versus that time that would prevent you from the recent run rate holding? Maybe you think about…
Well I would say 2005 and 2006; probably we're a stronger time economically, nationally and probably a stronger time in Florida. We just really had some tremendous outsized kind of comps in Florida in the mid-2000s. We hope we duplicate but we're not counting on it.
And then in terms of how you think about traffic and ticket going forward, maybe you can just talk about where you see the opportunities because traffic's been fairly strong recently.
We want to balance traffic and ticket and so we don't want to run promotions or step prices in a way that skew too much one way or the other. And so for us two-thirds, one-third either way sounds pretty good and that's what we'll be targeting. That's what we hope to achieve.
Would you describe your relationship with your produce suppliers and do you do much importing and how do you get out season product or don't you carry out certain product?
So we have great produce suppliers who cover the network, the 124 stores. One of those is based in North Carolina, one in Florida and one outside in Cincinnati. And we have local grower. So I want to make a distinction between growers and distributors and so we have three primary distributors of our produce. We have a great relationships with each of them. They are great partners. We have been with each of them for quite a while. These are deep relationships. Then we have a team of people that I think is kind of interesting that are working on buying and sourcing more locally grown product. It’s the hot trend ten years ago, was organic. I think that right now, that's the most interesting trend is locally grown. I think people feel quite a bit better about locally grown because they feel like the money stays in their neighbor. They feel like there is less gasoline in the product and they feel like they might be pressure and taste better. And so local works in every way but what's to keep in mind that most produce can't be local. Bananas aren't going to be local. Most apples are going to come from Washington State. Oranges are going to come generally from Florida and California. So local is exciting. I think it’s the most interesting trend but most produce won't be local and yes, we do import. So we import from South America to get out of season berries and things like that, but that's what I think a lot of food retailers are doing. We are not novel that way. The trick on that is just balancing, I really want to have it but the quality may not be very good, I don't want to disappoint the customers. So if you always it, you may disappoint from a quality point of view. And so sometimes it's better not to have it, than to have and somebody go home and have a bad eating experience.
So there's also been a lot of discussion about a drought right now going on in the Midwest. How do you think about inflation going forward? What's your expectation there and how does store based impact to your business?
Well, I think we said in our conference calls, we built into our LIFO or price reserve as a 2% inflation expectation for the year. so the drought for us is primarily affecting proteins and that's meat, chicken, pork and so we're definitely feeling that pinch and for what that means is that cost come up will have to raise our retails a little bit and the margin gets a little squeeze in that particular department. We're still bullish on margins overall. We're going to get squeezed on the proteins a little bit. Most of the rest of the finished goods cost of food, the commodity costs are just a small portion of that. So we're not feeling pinched really in the rest of the storage, just the protein.
So one just follow up to that, last year I know you had some pressure in specially in meat and bulk on the gross margin line, do you think about that as an opportunity in the back half?
I don't think there is any reason to think meat margins will be better this year than last year. Bulk and coffee margins probably are better this year than last year, but I think our overall picture is, we're guiding toward this operating margin improvement. I think we feel very confident about really to hit the guidance and very, very confident about our ability to build margins over the long term.
And then just on top of that just, to follow up on gross margin line, can you help us think about quantifying the new agreement with (inaudible) may be on how that will help you over the long term?
I don't know want to quantify as much as I want to say, you're seeing the evidence in the results we've had this year. I mean its meaningful improvement. We're seeing meaningful margin build. Not all of the improvement you're seeing is from (inaudible). We've gotten some other improvements from other contracts and from growers and producers of food. But its meaningful, its good. But again, the (inaudible) contract, the structures of the more volume we add, the lower our unit cost goes, but its been that way for a while. So we're going down a curve. It wasn’t a step change.
Okay, great. I think that's all the time that we have for today. So thank you all very much for coming.
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