IMI's (IMIAF) CEO Mark Selway on Q1 2017 Results - Earnings Call Transcript

| About: IMI plc (IMIAF)

IMI plc (OTCPK:IMIAF) Q1 2017 Earnings Conference Call May 4, 2017 3:00 AM ET

Executives

Lord Smith - Kelvin, Chairman

Mark Selway - Chief Executive Officer

Daniel Shook - Finance Director

Massimo Grassi - Divisional MD, Precision Engineering

Roy Twite - Divisional MD, Critical Engineering

Pete Spencer - Divisional MD, Hydronic Engineering

Analysts

Matthew Spurr - RBC Capital Markets

Max Yates - Credit Suisse

Jonathan Mounsey - Exane BNP Paribas

Mark Jones - Stifel Nicolaus & Company, Inc.

Stephen Swanton - UBS

Glen Liddy - JPMorgan Chase & Co.

David Larkam - Numis Securities Ltd.

Michael Blogg - Investec

Ryan Gregory - Liberum Capital Limited

Edward Maravanyika - Och Ziff Capital Management

Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to today's IMI plc Interim Management Statement Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, May 4, 2017.

I would now like to hand the conference over to your speaker today, Mr. Mark Selway. Please go ahead.

Mark Selway

Thank you very much [Lindad]. Good morning, ladies and gentlemen, and thanks for taking time out of your busy schedules to be with us today. I have with me Dan Shook, Roy Twite, Massimo Grassi and Peter Spencer joins us on the line. I hope you've had a chance to read through our IMS statement today. I don't propose to read it out verbatim, but I will cover off a couple of highlights and then we'll be happy to take any questions you might have.

Overall, two key messages. There are no unpleasant surprises in the first quarter and our strategy remains absolutely on track. And conditions have been pretty positive in the first quarter. Organic revenues increasing across all three of our divisions when compared to the first quarter of 2016 and of course, the significant currency tailwind which adds into the mix.

I'm pleased to say that the group's outlook expectations that we set out in February announcements have moved to the positive, and that now puts us in line with updated consensus and for the avoidance of doubt, with at 61.5p for the full-year. Most importantly, I'm delighted to report that our strategic plan remains absolutely on track, and it is continuing to make a real difference across all parts of the group. Our operational improvements are delivering the benefits, and the new product pipeline continues to build across all three of our divisions.

Looking at the divisions on a one-on-one basis, in Critical, sector prospects still remain quite mixed but good order input in the first quarter, and that reflects in part the continued benefits of our Value Engineering program, which delivered £41 million of new input in the first quarter and some very early successes in terms of Petrochemical in the quarter.

Oil and Gas in markets continue to remain quite choppy and uncertain. The half year will see better than previously expected revenues but that'll still be down a bit on 2016, with margins about the same as last year. As we said at the February announcement, cost reductions, and of course, all the phasing will mean the second half will deliver an improvement on the first half of the year.

Turning now to Precision, Industrial Automation revenues saw a continuation of the 5% improvement that we experienced in the final quarter of last year. Variable performance is across a number of the other sectors. Commercial Vehicle production was stronger-than-expected, both in North America and also in Europe, and that helped mitigate some of the contract completion issues that we flagged in our February announcements.

So with that, we're expecting first half revenues likely to be about the same as the first half of last year. And after we exclude the £4 million property benefit margins are expected to be a wee bit better than the first half of last year. The second half of the year, we'll see the benefits of maximized cost reduction activities and, of course, the business improvement initiatives, which are already underway.

In Hydronic, revenues were 4% higher than the first quarter of 2016, so Peter's new products and he's over the synergy and a stronger performance coming out of Asia all contributed to reinforcing our confidence in our expectation of good growth during the course of this year.

So in conclusion, I'm happy to say some good momentum since we last spoke to you in late February. It does reinforce our confidence in our ability to deliver the market's updated expectations for the full year. And I think with that, we're delighted to take any questions that you might have.

So I'll hand over to [Lindad] to arrange the questions if we can.

Question-and-Answer Session

Operator

Our first question comes from the line of Matthew Spurr. Please ask the question.

Matthew Spurr

Yes. Good morning, everyone. I just had a couple of questions. One was to just try to understand sort of underlying growth rates. So how much more Precision and Hydronics supported by higher working day effects in Q1? And the second one on Precision, talk about flat organic revenues in H1 and you had 3% growth in Q1. Can you highlight what you expect the reversal to bring you back to flat then for the first half, especially if you've already had that contract rolling off already hit in Q1? Thanks.

Mark Selway

Thanks, Matthew. I'll let Massimo take the question in relation to the second quarter. But in terms of the underlying, you're right. There was phasing obviously this year versus last year, and that probably helped us to the tune of about 1% of the growth overall. And that's a roughly, roughly number, Matthew but that's the sort of balance that you would see. And Massimo, can you take the question in terms of the second quarter and your expectations?

Massimo Grassi

Sure. Good morning, Matthew. As Mark mentioned, we had a very good Q4, with Industrial Automation exiting last year. This positive trend is being confirmed in Q1 this year, so we are quite pleased about where we are. What we need to consider for the remaining part of the quarter is that we have still a very high level of volatility, so we have quite important differences in terms of order intake week after week. Then we need to consider also that Q2 last year has been particularly strong.

And third, what has just been highlighted, in terms of working days, Q1 has been let me say, favorable compared to second quarter. So that's why we believe that we consider for H1 being about flat.

Matthew Spurr

Okay. Thanks guys.

Operator

Our next question comes from the line of Max Yates.

Max Yates

Thank you. Just my first question would be sort of similar on Critical and just to understand. Obviously, the very strong growth that we've seen in Q1 and then again the sort of idea of revenues being down year-over-year for the first half, what is causing that slowdown in the second quarter? Is that just order book phasing because in that division, the comp doesn't necessarily look any tougher for Q2. So just trying to understand the sort of the feed-through of the order book and the dynamics there.

Roy Twite

Yes. Thanks Max. It's Roy. Max, the comp on Q2 for sale, I think you're talking about organic sales, which were good in the first quarter. Obviously, the first quarter of last year, Max, and you know this, very lumpy business. The first quarter last year, we only actually did £126 million. And that's pretty typical, the first quarter is not particularly good. But 6% organic growth certainly wouldn't be getting carried away on what was a pretty low quarter last year. To give you the equivalent, we actually managed to do £191 million in the second quarter last year.

And really to come back a bit to what Matthew was asking, where's the difference? Why do we think we're not going to ship that much this year? It is what you said, it's all phasing and particularly really in two areas. One is LNG, which I think you all know that the orders came down by more than half last year. And the other is power, where we had a particularly strong shipment of some new construction orders in power last year in the second quarter. So [indiscernible] we have said in the statement, we think it's a bit better than we originally thought in terms of outlook for the first half, but still it's going to be down.

Max Yates

Okay. And maybe just to understand the sort of aftermarket business a little bit better. You're growing 3% there in Critical. And just to understand the kind of proportion of that aftermarket that's booked and billed, the proportion of that aftermarket. So if we see aftermarket orders coming through, what proportion is book to billed in the quarter?

Roy Twite

Yes, I mean, typically, Max, it's about a four-month lead time typically. But there are - there will be some bigger lumps in there. You probably remember, Max, if you look at our aftermarket for Critical, about 60% of it is parts, and that's really what's driving the majority of that lead time. About 20% is valve upgrades and a valve upgrade can take a year, and that obviously is quite lumpy, a typical valve upgrade could be $1 million. And then 20% is field service and again, some of our field service contracts, you can imagine, are annual contracts and others are very short-term. So it's a bit of a mixture depending on what's coming through, but that gives you a reasonable idea, I think, of outflows into sales.

Max Yates

Okay. And just a final one is around just, I mean correct me if I'm wrong, I think you said the Value Engineering orders were £41 million in the quarter, is that correct?

Roy Twite

Yes, that's exactly what Mark said. That's absolutely correct. And last year, Max, you remember we won £80 million in that engineering. Probably this is - Mark sort of pointed out in his script, we won two really nice Petrochemical orders in the first quarter using Value Engineering, and there were three petrochemicals we didn't - we wouldn't normally have won because they're right in our competitors outlet. So, yes that was a nice…

Max Yates

I mean just on - because I think you said last year that these kind of Value Engineering products are about 15% cheaper to make or you could lower the price by 15%. Are you still fully giving that benefit to the customer or are kind of maybe slightly better end market conditions allowing you to retain any of that?

Roy Twite

Max, I don't want to get that impression. So our end market conditions are just as tough, if not tougher than six months ago. Even if I look at - I think power in China has weakened further. LNG is no better than it was. And we have literally won a handful of projects that have happened to come along in this timing. It's more about time using Value Engineering. And if anything, we've had to give up a bit more margins to customers because everybody, every competitor is chasing a handful of projects.

Max Yates

Okay. Thank you very much.

Roy Twite

Thanks Max.

Operator

Our next question comes from the line of Jonathan Mounsey. Please ask your question.

Jonathan Mounsey

Hi, good morning. Just a couple questions please, first of all maybe sometimes in the past, you've commented on the subsequent month, so if you could give any comment, particularly just for Precision, how April's looked so far in Q2? Secondly, it's always been the discussion that with possibly looking at acquisition in Precision maybe back into 2017 into 2018 maybe an update on that, and then finally, just some maybe feedback from the launch of the new products in Precision and Hannover in the last couple of weeks and just how that went?

Mark Selway

Thanks Jonathan. Listen, subsequent, Dan, topline figures, so it's relatively early, but Dan, a quick heads-up on that.

Daniel Shook

Preliminary, April last year was a good month so we are down, in particular, Jonathan in Precision, we're seeing a 3% reduction. Now of course, we already talked about the working days there. So that's in line with what we expected and obviously, it leads us towards our guidance for the first half.

Mark Selway

In terms of acquisitions, Jonathan, very clearly, the business now has the bench strength in terms of management capability. Our processes are now really coming on-stream will the new IT systems are really started to be integrated, so all that says to us that we are able now to take on acquisitions and deliver well in terms of synergies.

As you know, it's a bit of roll over the dice in terms of when may become available, and the thing that we're almost about is that multiples things [hide] in the marketplace are a little heavy that we see across the sector. So we'll be careful to make sure that any acquisitions we take on are value enhancing.

But I can tell you, we're actively out there. We're looking for opportunities to go, but we're not going to overpay to get the right assets in. But certainly the team is focused and [indiscernible] want it and we would love to buy North American acquisition is Skyland Precision, if something would have become available.

The final question Jonathan? And I let me hand that to Massimo, if I can.

Massimo Grassi

Sure. Good morning Jonathan. So Hannover last week was a very, very good fair for us. We are really pleased. We had a lot of very interested customers. We had an excellent feedback on our new products. Lastly, we launched officially our new three major products launches.

The first was in actuators with the new Hydro-Line. Second, major product was on air preparation with the new Excelon Plus. And the third, a new valve island. All of the three families with increased capabilities of communication and digital transmission, so consistently in the [4.0]. So excellent reception, and we are very excited and now starting selling these great new products, so very, very positive output last week in Hannover.

Jonathan Mounsey

Can I just slight follow-up on that? Should we be thinking about ramp-up costs, marketing, et cetera on those launches as we go through the year? [Indiscernible]

Mark Selway

Being absorbed within the results that we've outlined Jonathan. We tend to take a prudent approach in terms of our budgeting for these launches and the buildup of inventory. As you're aware, Massimo was successful in bringing down his inventories last year quite substantially. We probably won't see the same benefit this year because of the ramp-ups, but we're still expecting some progress in terms of working capital in his business during the course of this year, Jonathan.

We got other questions on the line Lindad.

Operator

Our next question comes from the line of Mark Davies Jones. Please ask your question.

Mark Jones

Good morning, all. Can I get back to Roy in some of the end markets within Critical? The further weakening in power in China, is that just timing a general market or is some impact from this sort of increased drift towards renewables? It seems to be going on in terms of spending there? And any progress in power outside of the Asian markets have been waiting for something to happen in the U.S. for a very long time but happening any progress there?

Roy Twite

Yes, thanks, Mark. Mark, in China, as you know, there's been a huge push to renewables, a bit of a push in Nuclear. Some of in the first quarter, we won a couple of Nuclear orders in China. Of course, the [world in] Nuclear orders for us in the first quarter of last year. But coal, in particular, is under pressure, and that's exactly what I was referring to. The Chinese government has slowed down the rates of approvals on coal-fired power.

So whether that's sustainable or not, I'm not sure because there's still a huge need over the medium term for electricity in China as their you know more energy-intensive industry pickup like mining and so on. U.S., I agree with you. Not a real pickup at the moment. No real discernible change in what we've seen over the last couple of years.

Mark Jones

Okay. And then any update on where you're seeing in terms of timing of the cycle on the oil and gas side. It's obviously very tough through this year but in the more visibility on that where we've bottomed and when we should see some sort of inflection there?

Roy Twite

Mark, as you know, these many more economies try to coalesce, but I think you remember that the biggest single card on construction oil and gas is LNG. And from that perspective, we see it's a fantastic long-term market. We had a presentation yesterday where we see it's 4.5% to 5% long-term but as another's overcapacity in place for the next two or three years.

So for us, it's going to be we think it about the level that we saw last year in terms of orders sort of £25 million. And we don't see an inflection in that market yet. We have made some progress in upstream but that's more new product and we released. So Mark, I would say no real sign apart from shale obviously, and we've got very little in shale, but outside of shale, we don't see any real discernible upturn yet.

Mark Jones

Thanks very much.

Roy Twite

Thank you.

Operator

Our next question comes from the line of Stephen Swanton. Please ask your question.

Stephen Swanton

Good morning, guys. I had a couple of questions. One is, can you clarify what the order input was in Q1 in Critical? Just year-on-year organic number actually I missed it. The second question is on Precision and I was just wondering if some of the other end markets picked up, some of the other sectors picked up in Q1 versus Q4 you already kind of referenced trucks and Industrial Automation. And I should link to the timing because of the pickup, and I guess, things are going better than expected, I know it's still pretty early days but does it make you think differently about the second phase Project Janus or is it still too early for that?

Mark Selway

So I think in terms of Q1, our order import was up 23% for Critical versus last year. And as Roy said, were successful with a Value Engineering projects, particularly in Petrochemical that delivered £6 million to £8 million of order input during the quarter. So that was a great uptake for Roy's team but has not delivered until - I think it's virtually none of it being delivered this year Roy/

Roy Twite

That's right Mark and so early year.

Mark Selway

So great to have the orders, but just be careful to what to not translate that 23% of order input into revenues this year. I think in term of Precision, 80% of the revenues still come out of Industrial Automation and Commercial Vehicle. We saw some downside in Life Sciences.

And that's really because of customer change of product and that's a change-out of an old product to a new one and they take some time before that starts to get some traction. Energy was down a bit, but we're holding our own in market share terms. And in Rail, we saw some really good orders during the year - during the quarter. But again, coming back to the two most important things, Industrial Automation up 5 and Commercial Vehicle down 2 in the quarter.

Stephen Swanton

Okay.

Roy Twite

And Janus Phase 2 we're still - we have a plan in place, Stephen. We're working through that plan. Clearly, if the Industrial Automation market continues to show progress, and we have had some successes in truck, we mentioned the [indiscernible] program that has been secured and there is a large line of opportunities that Massimo is chasing in truck. It's probably going to be the next six months to determine [indiscernible] drop through, but those things will affect our Janus program as we outlined in February.

Stephen Swanton

Okay, thank you.

Operator

Our next question comes from the line of [William Turner]. Please ask your question.

Unidentified Analyst

Hi, everyone. Two questions for me, both on Precision Engineering. Is it possible to quantify the marketing costs that you're expecting for the first half, and whether you expect this to be a headwind on margins or whether you expect margins to actually be down year-on-year? And then secondly, what is that's - what are these marketing cost being spent I know you're trying to expand into other regions outside of Western Europe as you mentioned, Asia particularly strongest quarter? Thank you.

Mark Selway

Yes. Well, I think in terms of Precision, to be clear, we just launched a brand-new range of products, and it's the first new platform products that have been introduced for 10 years. The marketing expenses are very much about things like the Hannover fair, other branding and [indiscernible] and the other things are undertaken. It's not huge in the overall scheme of things. Margin-wise, as we've said, we're expecting that we will see some progress in margin as a consequence of the improved revenue in the first quarter, and that's reflected in our outlook statement.

So look, I think in terms of marketing, you're going to see a ready run rate from the first half into the second half. We are not expanding into new sectors. What we're doing is bringing new products to the table. For those who have known us well over a number of years, we have seen a declining market share year-on-year-on-year over a decade. And the intention of these products is to reverse that trend and then to see some growth beyond that. So look, I think we're absolutely on track, William, but you don't need to worry about significant marketing cost impacting margins in either the first half or the first half of the year.

Unidentified Analyst

Sorry, I actually meant for Hydronic Engineering rather than Precision.

Mark Selway

Right. In Hydronic, we did the trade show this year, and there are expenses in doing that show. It's every two year, so as a direct comparator of first - of last year, there will be a small decline in margins in the first half. We took £5 million of costs out of that business you should be aware at the start of this year. And very clearly, in the full-year, we're expecting a bit of a pickup in the margins.

Daniel Shook

They are clearly already in a rhythm now of bringing new products every year, so it's well baked into the last year results.

Unidentified Analyst

Great. Thank you.

Operator

Our next question comes from the line of Glen Liddy. Please ask your question.

Glen Liddy

Good morning, guys. On Hydronic, I think at the end of last year, you flagged up that you had a new distributor on board. Is that now fully up and running in the supply chain stock properly? And the second question was on the Precision business. Trucks have done better than expected so far this year. Have you changed your overall expectations for the U.S. and European truck markets for the whole of the year?

Mark Selway

So listen, we'll hand over to Peter first. Pete, on your new over-the-counter contracts, I think Glen's question was is the supply chain now filled and are you starting to see some revenues come from that? So Pete, could you take that if you will.

Pete Spencer

Yes. Good morning, Glen. The European-wide agreements that we have with the new wholesalers takers into new markets that we haven't played in before. And the new products are helping out really to underpin the 4% growth in the first quarter. So that's going very well, the supply chain also and that was been in the fourth quarter last year. And obviously, there's a great potential because the great thing about these over-the-counter customers are they're more predictable and to be business and obviously, we intend to expand that during the course of this year.

Mark Selway

Okay and Massimo in Precision?

Massimo Grassi

Yes. Good morning, Glen. With regards to the CV market, we certainly have both sides of the ocean, improved features in terms of full-year sales. We believe that U.S. market. It was expected to be negative over about 10%, [indiscernible] around 5% decline year-over-year and in Europe, where we're expecting a market of about minus 5%, minus 7% we'd rather be close to being flat. So definitely an improvement was unfortunate, not an improvement for us is the £13 million of contract coming to an end that is maintained and it is definitely an important headwind for us in the CV market in 2017.

Glen Liddy

That's great. Thanks very much.

Operator

Our next question comes from the line of David Larkam. Please ask your question.

David Larkam

Good morning, guys. Most of my questions have been answered. But just if I look at Critical, I'm just surprised a little bit by the mix. You said new equipment and orders, which seemed to be doing better or sales were in the first quarter. So I thought you had a lot more visibility on that. So was that a surprise of that business generating growth aftermarket?

Roy Twite

It's Roy. Good morning Dave. Not really though, wasn't that much surprise. As you know in this market, customers, at the last minute, will not come for inspection or find a reason that I'm actually want the goods because the markets slow in the projects running slow. So we have to be reasonably conservative in our forecasting to take all of that into account.

The more actually happened in March was that we got a nice run on two large projects, one of which was in petrochemical, where the customer actually having gone slow in this project since March last year now wants to get it done. So we had a bit of luck really in terms of completion here in March, which is what's driven those sales. And as I said, it's not a reason to get overly excited because at the half year. Yes, we're going to be slightly better than we thought, but we're still not going to be positive territory, I don't think, David versus last year.

David Larkam

Okay, thanks.

Operator

Our next question comes from the line of Michael Blogg. Please ask your question.

Michael Blogg

Good morning, gents. This is a question I think for Dan. You've given us guidance on the FX impact based on average Q1 rates. If you were to recast recent spot rates, obviously with Q1 under your belt, what do you think the benefit would be?

Daniel Shook

Yes, hey Michael. Yes, obviously Theresa May's election made a bit of move. That 7% were called for the full-year comes down to probably around 5%. Again still very much first half loaded in light of what happened in the middle of last year with the exchange rate. So yes if you take what we're seeing right now, it'll probably be around 5%.

Michael Blogg

Okay. Thanks very much.

Daniel Shook

Sure.

Operator

[Operator Instructions] Our next question comes from the line of [indiscernible]. Please ask your question.

Unidentified Analyst

Hi, thank you for taking my questions. I have two on the Critical Engineering segment. The first question I have is, as you know, a couple of your peers have reported their results as well over the last two weeks in the U.S. They tend to report negative low to mid single-digit declining revenues and so on and so forth. And obviously, you numbers are much better than there. Can I read that as evidence that you are gaining market share because of engineering and all the things that you're doing or are the numbers actually comparable. So that was my first question.

My second question much shorter is regarding China. Where they are approaching renewables over this non-coal fired power station. Do you have a sense where you can share the same amount of content per megawatt of power to a nuclear station, gas power station, as much as you can do it in coal? Thank you.

Mark Selway

Good question. Thank you. Yes, we obviously watch the peer group like a hawk, we are not going too much into because we are in slightly different areas and we are very strong in that area for a long time. That was really good for us and lately, it haven't been fair for us, but look you got to get into the future, and we obviously tend to be slightly stronger in power than most people as well. And perhaps the third thing, James, is that our aftermarket is high for about company because we've put a lot of control valve business in very critical applications where they get [indiscernible]. So we've got a good sort of base business.

You are right though, and again the first quarter is the first quarter and perhaps to get give you one more stat actually. Orders were 23% up in the first quarter. We would actually got flash April orders overnight, as Dan said. And year-to-date, we're now 12% up. And that's still a lot stronger, I think, than all the peer group. But that just shows you how lumpy this business is and I really don't want people to get carried away with that 23% number. I think Value Engineering is definitely giving us an edge, James. Even in areas now where I honestly didn't expect to win because the competition - is the competition homeland and I refer to those to [indiscernible] orders in Asia.

Value Engineering is giving us an edge plus we are going aggressively after that business because of the contribution it makes to fixed overhead, because of the aftermarket that comes with it. So as we keep saying, new construction margins are about 2% lower than they were, as I said on the last few calls when we are quoting in overall terms. So I think it's midst of those things. We are definitely becoming a lot more competitive.

It's definitely Value Engineering helping. The lean work is helping in terms of our setup times, the organization and our factories. And of course, ERP is starting to contribute. We're very much standardizing our systems reporting within [indiscernible] that's having on improved overhead efficiency. So I think that's mix of all that investment, James, it's making us more competitive company.

Massimo Grassi

China, just very quickly on China, our content on Nuclear is very similar per gigawatts in power. In gas, it's about the same as well. What we like, what is really good for us is combined cycle gas, especially heat and power because if that gas power station is cycling heavily, then it obviously drives up our spares content and that is obviously where we make very good margins. So that's the only comment I would make on that area, James.

Unidentified Analyst

Okay. Thank you very much.

Mark Selway

Thank you.

Operator

Our next question comes from the line of Ryan Gregory. Please ask your question.

Ryan Gregory

Hi. Good morning, everyone. Thanks for taking my question. Just a couple on Precision please. How has your capacity utilization rate gone over the last six months or so both through your internal elections and clearly through relative modern trends? And then quickly, the contract lost in Commercial Vehicle, is there going to be a bigger impact in Q2 versus Q1 or is it going to be the same? Thanks.

Massimo Grassi

Yes, good morning Ryan. First of all about the capacity, we are improving our capacity utilization. As you may remember when we started Janus project, we were around 50%. Now we are very close to 60%, and we are targeting to be at 65% by the end of 2017. So we are progressive - progressing as planned so we are quite pleased. With regards to the contract in CV, it's quite, there are not big differences over a quarter, but in Q1 is a little bit higher, but directionally it's above the same.

Ryan Gregory

Okay, great. Thank you.

Massimo Grassi

Thank you.

Operator

Our next question comes from the line of Edward Maravanyika. Please ask your question.

Edward Maravanyika

Good morning all. Just a quick question on Precision Engineering, if I may, I think you said last year North America was down significantly, How has this year started in Commercial Vehicle in particular?

Massimo Grassi

Yes. Good morning Edward. So in the U.S., Q1 has been overall slightly negative despite a positive results in terms of Industrial Automation. And in CV, it is a little bit better than expected, but still the negative by three points.

Edward Maravanyika

Okay. Okay, understood.

Massimo Grassi

Thank you.

Operator

There are no further questions at this time Mark. Please continue.

Mark Selway

So I thank you very, very much for joining the call. I hope you take from this call that we did. We have seen a good and positive first quarter to the year. We do have second quarter comparators to think about in terms of last year. The outlook expectations that we set out in February, obviously were upgraded to overall consensus of 61.5 and we feel comfortable given the first quarter that's an objective that's certainly achievable and we're saying some good progress in a number of market.

So thank you very much for joining the call. I wanted to reiterate, no unpleasant surprises from the organization. Our strategic remains absolutely on track and these new products that will launch particularly Hannover, there I spend time with Massimo and his team, great deal of excitement and enthusiasm from the sales force. And we think that momentum will build as those products hit the market. So again, thank you very much for participating on the call.

Operator

This does conclude our conference for today. Thank you for participating. You may all disconnect.

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