Navigator Holdings Ltd. Q3 FY2020 Earnings Call

Thank you for standing by, ladies and gentlemen, and welcome to the Navigator Holdings conference call on the third quarter 2020 financial results. We have with us Mr. David Butters, Executive Chairman; Mr. Harry Deans, Chief Executive Officer; Mr. Niall Nolan, Chief Financial Officer; and Mr. Oeyvind Lindeman, Chief Commercial Officer. I must also advise you, the conference is being recorded. And now I pass the floor to one of your speakers, Mr. Butters. Please go ahead, sir.

Thank you very much, and good morning, everyone, and welcome to Navigator's third quarter earnings call. As we conduct today's conference, we will be making various forward-looking statements. These statements include, but are not limited to, future expectations, plans, and prospects from both a financial and an operational perspective. These forward-looking statements are based on management assumptions, forecasts, and expectations as of today's date and are subject to material risks and uncertainties. Actual results may differ significantly from our forward-looking information and financial forecast. Additional information about these factors and assumptions are included in our annual and quarterly reports filed with the Securities and Exchange Commission. Now our speakers today will include our usual, Harry Deans, our Chief Executive Officer, will lead off; followed by Niall Nolan, our Chief Financial Officer; and winding up our conference today will be comments from Oeyvind Lindeman, our Chief Commercial Officer. So Harry, why don't you take over the call?

Thanks, David. Good morning to everybody on the call. I hope you are well and keeping safe. At the beginning of September, in line with the prevailing government advice, we reopened our company offices on a phased team A, team B basis with staggered working hours to both reduce risk and to maintain social distancing. This turned out to be a temporary measure. However, as the second wave of COVID-19 started to take hold in late September, we subsequently had to close our offices again, and once more we're running our business remotely from numerous home offices worldwide. We expect this will remain the case well into Q1 2021, if not beyond. By now, we are all very familiar with the technology, thus ensuring a seamless transition and maintaining business as usual with no impact on our operations, our customers, or our employees. This week, the prospect of the Pfizer vaccine provided a glimmer of hope for all of us and was a welcome shot in the arm for the global economy. We all live in hope that this vaccine or one of the others that are currently in development will prove to have good efficacy and be quickly rolled out globally, much to the relief of everyone. U.S. LPG production and exports have been remarkably resilient throughout this pandemic, and there's no sign of that abating. In fact, the recent modest uptick in U.S. rig counts helps further underpin confidence in LPG supply, which was needed. Heading into the winter season, U.S. LPG stocks are at 5-year highs. This coupled with former oil prices and improving naphtha LPG spread and robust demand in China should ensure export tons are priced to move. It was very pleasing to note that despite the impact of the weather headwinds and petrochemical supply from hurricanes Laura, Zeta, and Eta, the business continued to be profitable in Q3, albeit at lower levels. We have built on the momentum of Q2 with a net income of $1.5 million and an adjusted EBITDA of $31.9 million in Q3. Our ethylene terminal joint venture was profitable for the quarter, helping to more than offset the impact from the shipping business of the weather disruptions in the U.S. Gulf. The quarterly and year-end to date operating revenue, net income, and EBITDA have all improved substantially compared to 2019. Utilization, on the other hand, has proved to be a bit of a roller coaster this year. After starting the year in the high 90% levels, rates dipped to the mid-80% levels in February, March, and April when the pandemic struck, before rallying to the low 90% levels in May and June. Unfortunately, that recovery in utilization rates was short-lived as hurricane Laura knocked out over 25% of the U.S. global olefins capacity for an extended period of time, causing rates to fall back to just under 80% for Q3. Although October was also impacted, thankfully, utilization rates have since started to recover and are currently hovering in the mid- to high 80% levels. The record 2020 hurricane season was, in many respects, a perfect storm, leaving in its wake reduced olefin supplies, causing domestic prices to spike and leading to a narrowing of the ethylene arbitrage to Asia. Thankfully, our operating units have since recovered as units ramped up and product was again priced to move. Turning now to crew release, I am pleased to report that we've been able to dramatically reduce the overdue crew changes by completing a significant number of crew releases. Currently, we have less than 50 sailors who have overdue leave, and we continue to work hard to reduce the backlog whenever and wherever possible. We are working pragmatically with the flag states and classification societies as we resolve the many practical inspection and dry dock challenges that have been caused by this pandemic. Our Morgan's Point joint venture ethylene terminal continues to exceed our expectations and has had an impressive quarter, both in terms of profitability and throughput. We have now exported just over 300,000 tons in the terminal. The terminal complex is working extremely well, and we're impressed by the workmanship, the quality, and the performance of the installation. As you can see from the photographs in the supplemental information pack, construction of the ethylene tank is progressing safely, on budget, and on time, with commissioning and start-up scheduled for December this year. We expect the first ethylene tons to be loaded into the tank in mid-December, which will be a key milestone and a crucial step in our journey to our nameplate capacity of 1 million tons, and we fully expect that our terminal will exceed nameplate capacity with these operations in the future. Over Q3 now, and this team have been very busy progressing our refinancing initiatives. The long and short of it is that the company now has a much improved balance sheet and has significantly boosted our liquidity to around $120 million, with a clear loan expiry runway until March 2022 and with no maturities over the next 17 months. Now in these prepared remarks, we'll provide much more color on our recent refinancing success. Q3 has been a mixed quarter for our business with considerably weather-related headwinds, which have impacted our overall utilization rates, some of which lingered well into October. This has been more than offset by our terminal, ethylene joint venture tailwinds, which, although including some one-off gains, have ensured that Q3 continued in the same vein as Q2 and remained profitable. Our ethylene terminal diversification strategy is now demonstrably starting to pay dividends as the stable cash flows from this infrastructure investment with its take-or-pay contracts start to hit our bottom line. When the terminal is fully commissioned and the volumes are ramped up, this stable cash stream will grow further and help offset volatility in our shipping business. Thankfully, we've now come out of the hurricane season and utilization rates have started to improve. As the handysize, new-built vessel order book is at historical lows and with the imminent ramp-up of several new North American export facilities in late 2020 and the first half of 2021, including our Morgan's Point ethylene joint venture and the Repauno terminal throughputs facility, we believe these factors will help fund vessel utilization rates. This, coupled with an improving ethylene arbitrage and increasing demand for ethane and LPG in China, will help boost exports, and should, all things being equal, be good news for the handysize segment and for Navigator Gas. We are in pole position to capitalize on these opportunities with our terminal joint venture, our Luna Pool, our existing fleet, and our strong balance sheet. With these few remarks, I'd like to hand you over to our CFO, Niall Nolan. Niall?

Thanks, Harry, and good morning all. As Harry mentioned, the company generated profits of $1.5 million for the third quarter, the second consecutive quarterly profit. And this compares to a quarterly loss of $2.9 million for the third quarter of last year. EBITDA for this third quarter was $31.9 million with $4.4 million being generated from the operations of the terminal and $27.5 million from the shipping segment. Total operating revenue from the vessels was $81.4 million for the quarter, an increase of $5.7 million from the $75.6 million generated during the third quarter of last year. Net revenue for the third quarter of both years was the same at $62.2 million, however, with some differences. Cost revenue increased by $4.1 million between the two comparative quarters as a result of an increase in average charter rates, which rose to just under $700,000 per month or $22,892 per day from just over $650,000 per month or $21,466 per day for the third quarter of 2019. Average charter rates across the nine months of this year averaged $21,733 per day, an increase despite any negative impacts of COVID-19 from the $21,000 a day achieved during this equivalent nine months of last year. However, although charter rates continued to see some upward movement, utilization was a challenge during the third quarter, reducing to 78.8% from 84.6% for the third quarter of last year, primarily as a result of the effects of hurricanes Laura and Delta, which Oeyvind will refer to later. This reduction in utilization had a $4.5 million negative impact on revenue. However, notwithstanding this reduction, utilization over the nine months of 2020 remained higher at 85.4% than the equivalent period in 2019. Our Luna Pool earnings, which are aggregated and allocated to pool participants in accordance with pool points, resulted in the other participants' vessels contributing $1.2 million to our vessels in the Luna Pool during the quarter. Revenue also reduced by $900,000 due to an increased number of days that the vessels were in dry dock during the quarter. Five vessels completed dry docking, taking a total of 112 days when vessels would have been unavailable for charter, relative to 64 dry docking days during the third quarter of last year. This increase in dry dock activity was as a consequence of dry docks being delayed earlier in the year as a result of COVID-19. Seven dry dockings in total have been undertaken during the nine months of 2020 at a total cost of $8 million, and three vessels remain to be dry docked during the fourth quarter at an expected cost of approximately $4 million. Vessel operating expenses were $27.2 million for the third quarter or $7,786 per vessel per day, an increase of 1.5% from the $26.8 million or $7,672 per day incurred in the comparative third quarter of 2019. General and administrative costs increased by $1.9 million for the three months ended September 2020 and $2.9 million year-to-date. This year-to-date increase related to $1 million on foreign exchange losses on the revaluation of an Indonesian rupiah bank account, which should not be repeated and may reverse; a $1 million increase for audit and related fees; and $600,000 for additional top-up insurances for the Marine Export Terminal. The other income of $200,000 in the income statement relates to management fees received for the management of the Luna Pool. Interest costs for the third quarter reduced by $2.6 million or 21% to $9.8 million, primarily as a result of reductions in U.S. LIBOR, which has now fallen since September 2019 by 180 basis points on our approximate $760 million of variable interest rate debt. The share of results of equity accounted joint venture, i.e., the terminal, generated a profit of $3.1 million for the third quarter, our first quarterly profit following the long-term throughput agreements becoming effective on June 1, 2020. Net income for the third quarter was, therefore, $1.5 million or $0.03 per share compared to a loss for the third quarter of 2019 of $2.9 million or a loss per share of $0.05. During the most recent quarter, we entered into an agreement to amend the terminal credit facility to allow an early true-up of $34 million. This amount was drawn down on October 8. We also concluded the refinancing of one of our vessel loan revolving credit facilities on September 24, which provided additional available cash of approximately $30 million, $25 million of which remains undrawn. At September 30, available cash stood at $61 million. And this, together with the $34 million from the terminal facility and the $25 million currently undrawn on the vessel RCF, provides available liquidity of $120 million. We had a further $6.1 million as restricted cash supporting the cross-currency interest rate swap relating to our Norwegian kroner bond. Although since the quarter end, and as a result of further strengthening of the Norwegian kroner versus the U.S. dollar, this restricted cash has reduced to $3 million as of yesterday. During the quarter, we also refinanced our $100 million unsecured Norwegian bond with a new 5-year like-for-like bond. This bond, which matures in 2025, attracts an interest rate of 8% per annum. Importantly, as Harry referred to, the company does now not have any debt facilities maturing until April 2022. Finally, with respect to the construction of the ethylene terminal, we have contributed a further $7.5 million during the third quarter and an additional $2 million since the quarter end, both fully funded by drawdowns from the terminal facility. Following these drawdowns, along with the initial true-up of $34 million, the aggregate amount now drawn under that facility is $51 million out of a total available amount of $69 million. The remaining $18 million will fund the remaining capital commitments of only $4 million on the term loan with a final true-up of the balancing $14 million to be released for general corporate purposes prior to the year-end. And with that, I'd like to hand you over to Oeyvind.

Thank you, Niall. As Harry mentioned initially, we were on a roll during the summer months, ramping up the ethylene export terminal with record-breaking export volumes of competitively produced U.S. ethylene. The utilization levels were in excess of 90%, and our specialized fleet enabled Asian post-COVID Phase I demand to flourish. Ethylene, as well as propane, were required for the production of personal protection equipment such as face masks. Once the vessels completed discharge operations in Asian ports, the captains had standing orders to double back to the U.S. Gulf to pick up the next export parcel. This was all happening when the U.S. Gulf petrochemical industry took precaution in anticipation of hurricane Laura's landfall. From the middle of August, one-quarter or 25% of the entire U.S. ethylene production was shut in preparation for Laura's landfall. The hurricane did make landfall right in the middle of the ethylene-heavy Lake Charles area. Luckily, minimal physical damage occurred at the petrochemical industrial parks; however, the shutdowns were prolonged due to slower repairs of the local electricity grid and continuing scares of additional hurricanes. Only after hurricane Zeta made landfall in October in exactly the same location as Laura did, did we see a meaningful restart of the crackers and subsequent production. The impact this year was extraordinary for the U.S. Gulf with a record 12 named storms and hurricanes making landfall in the area. Therefore, from mid-August through October, U.S. domestic ethylene prices rose as there were little to no excess production available. It went from its lowest level of $0.09 per pound in the summer, reaching above $0.30 per pound during the hurricane period. Exports through the terminal reduced, which directly impacted our ethylene fleet. The vessels that have been ballasting back to U.S. Gulf for ethylene prospects had to either face idle time or look for alternative employment opportunities in the semi or fully refrigerated segment. However, the ethylene fundamentals are reverting back to where they should be. U.S. production is up and ethylene pricing is trending downwards. This week, we had ethylene quoted sub-$0.18 per pound, and Asian demand is still holding strong, resulting in possible arbitrage of more than $400 a ton today, which is widening by the day. Consequently, there's been a noticeable uptick in activity and discussions for November and particularly December on both freight and terminal throughput. Our utilization has recently improved from the lows of the hurricane season, hovering today in the mid- to high 80% level. U.S. natural gas liquid production remained strong, which is positive, ensuring competitively priced feedstock for the U.S. ethylene producers. It also bodes well for continuing ethane exports as well as LPG exports. It underpins there are prospects of full volumes going through the terminal once the tank is operational. The annual nameplate capacity of 1 million metric tons of ethylene gives about 80,000 tons per month during any seasonality. If we assume that the majority of these molecules will head transpacific to cater to Asian demand, then this translates to about 15 handysize vessels. That is a huge difference compared to the vessel demand from that terminal during the lows of the hurricane season, which were at 3 to 4 vessels. The quoted market rates for handysize ships have been moving sideways since May, including through the recent hurricane volatility, at about $20,000 a day. With recent developments, I think the market pundits will find sufficient evidence of a tightening supply-demand balance in our segment, setting the direction for the market quotes into 2021. The LPG markets remain positive, particularly in an environment with stronger oil appetite going forward. This enables gas to play out its rightful role as a viable substitute for oil products, with the added bonus of reducing greenhouse gas emissions. With that, I will hand you back to the operator.

We would be ready to open the conference to questions and answers, please.

And your first question comes from Omar Nokta from Clarksons Platou Securities.

I just wanted to talk about the terminal. Obviously, it turned to profit officially this quarter, which gives you a nice visible stream and can be counted on while the trading fleet can be a bit more volatile as we just saw this quarter. You mentioned in the release that the hurricanes impacted the shipping business in the Gulf Coast. But you also mentioned it affected the terminal. Are you able to quantify what kind of impact that is, say, the fourth quarter?

I believe the issue with the hurricanes is that the production capacity took a long time to return to normal. The impacts were felt primarily in the latter half of August, September, and October. In November, we experienced stronger throughput, and we expect it to meet our expectations for December. Therefore, December is likely to be at similar levels to what we saw in June and July.

Okay. And if we just think of it in terms of numbers, in the third quarter, you got $4.4 million of EBITDA, $3.1 million of earnings. Is that repeatable, you think, with what we've seen so far for the fourth quarter?

I think that based on what we've observed in October and the early part of November, the expectations might be slightly high, but not by a significant margin.

Okay. And generally, how do the terminal contracts function regarding events like storms and hurricanes? Are they take-or-pay contracts?

Yes, they are.

Okay. Great. And then just sort of one other follow-up. I just wanted to ask, it's been about 6 to 8 months since you guys formed the Luna Pool, and just wondering if you can give an update on how that's working. And also with the disruptions that we saw in the third quarter, hadn't that pool actually proved beneficial as you kind of work to try to figure out other employment opportunities for those ships ballasting into the Gulf?

Yes. So the Luna Pool, as we discussed last call as well, it's fully operational. It commenced 1st of April, and today, all the 14 ships are in the pool and performing accordingly. The Luna Pool consists of ethylene ships, specialized ships. The pool is formed to better service the ethylene customers and, of course, also the U.S. Gulf ethylene exports, including from Targa terminal and our own joint venture terminal. So of course, when there are fewer ethylene to be exported from there, it will impact the pool, but the whole concept of the pool is collaboration and sharing of earnings. Therefore, through the pool, we were during this time, more likely to have the right asset at the right location for other cargoes. So if we only had our own ships, and let's say, we navigated, ballasted most of them back to U.S. Gulf, we wouldn't have had any other ships available for other opportunities. But through the pool, those chances are available to us.

And your next question comes from Ben Nolan from Stifel.

I wanted to follow up on Omar's last question. Was the Luna Pool somewhat responsible for reducing utilization across the fleet? The Luna Pool specifically focuses on carrying ethylene, which requires dedicated vessels. In the past, if there wasn't an ethylene cargo available, vessels could take on propane or other types of cargo. Because of these dedicated cargo commitments, did you potentially miss out on business that could have kept utilization levels higher?

I don't think so. It's a complex question. With the 14 ships, clearly the ambition is to trade with ethane and also ethylene. So whether the pool was in place or not, and you are facing this volatility that the hurricane caused, less exports in that one particular cargo grade, with the pool or not, we would be chasing other opportunities and working very hard to find alternatives. The point with the pool is that we have a more global footprint, therefore, the chances are more likely that we can find other alternatives. So I wouldn't say that the pool has been detrimental in utilization for Navigator during this time. I think it would have been more or less the same, probably a little bit worse if we hadn't had the pool.

I think I'd add something to that, Oeyvind, that when you have been doing ethylene and intend to do ethylene and you're sitting around, and you don't want to take a cargo of propane or butane or whatever else, because when you get back to ethylene, you have to stop, clean, and refrigerate. It's a process that takes time and money. So in the case where you are temporarily down, such as caused by the hurricanes, your choice is just to sit there and wait until it clears and the ethylene becomes available because it's just too expensive and time-consuming to take a spot cargo of propane, do that cargo, and then come back to do the ethylene; much more expensive. This causes an extra delay, if you follow me.

Yes, sure. So you probably would not have picked up a cargo one way or the other...

It was unlikely to proceed. As long as you expect to resume ethylene production quickly, that's what we planned for because the shutdowns were thought to be temporary. However, they lasted longer than anticipated due to prolonged electricity outages.

Were there any details in the release about a new multiyear contract on a vessel with a Chinese counterparty? Can you provide any information regarding the rates?

This was in our Q2, actually, announcement, I think we put it in, where it's a 3-year contract at higher than mid-$30,000 rate per day.

Got it. So it wasn't an addition to Q2. That's useful. Lastly, this is more of a strategic question, I guess, David or Harry. As you assess the company, you've made significant progress in taking delivery of many ships, and the terminal development has been going well. However, the share price has been stagnating below the levels seen shortly after the IPO for quite some time. Has this influenced your strategic perspective on the company's position? Are you considering consolidation or any other approaches due to the progress made and the corresponding lack of share price movement? Has your long-term view of the business changed at all?

David, you go first.

If you consider the challenges Navigator has faced over the past couple of years, including sanctions, tariffs, the coronavirus shutdown, oil pricing issues, and hurricanes impacting the petrochemical sector, it's significant that we are still generating profits. These circumstances have created uncertainty about the future. However, an important development this week with the Pfizer vaccine has started to clear some of that uncertainty, allowing people to begin planning again. I believe that the U.S. will accelerate its exports, not only of raw materials like propane and butane, but also of intermediate chemicals such as olefins, propylene, and ethylene. The infrastructure needed for this is still in its early stages. Our terminal is world-class but is just the beginning. I foresee a growing need for this type of infrastructure, including more facilities designed for export rather than domestic use. For instance, Enterprise is currently building a second propylene facility in Texas solely for export. While many have temporarily stepped back due to unforeseen challenges, the direction of the U.S. petrochemical industry is now clearer than ever, with exports and domestic production being crucial, alongside the need for international infrastructure. We are in a favorable position and will continue to expand. Although we've faced some unexpected setbacks, we believe we are strategically well-positioned. While we are disappointed with the stock price, we’re not alone in feeling this way, and such situations are typically temporary. It might be that we're entering a new phase focused more on value stocks like Navigator as compared to growth stocks, but I believe we offer a combination of both solid growth opportunities and significant value. Our commitment remains strong, and I'm as excited as ever, despite the disappointments we've encountered.

Thank you, David. I believe you explained it very well. Our strategy is now on course and beginning to show results, as evidenced by the terminal. In the upcoming period, we will nearly double the capacity at that terminal. Navigator is uniquely positioned to connect suppliers and consumers of ethylene, ensuring product availability in the United States wherever it is needed. Our strategy is unfolding positively, and we are enthusiastic about it. There are additional avenues we can explore to further develop this strategy moving forward. We're all feeling frustrated about the share price, but that's just part of the journey, isn't it, Ben?

And your next question comes from Sean Morgan from Evercore.

David, so I think one of the things you said in your response just now that you kind of view yourself as a value but also a growth company. And we look at the sort of CapEx and cash requirements, 3 vessels that need dry docking, and then probably, I think you said only $4 million of additional capital needs to be paid for the existing terminal and Morgan's Point. But then there was also a lot of work done to refinance the credit facilities and working in the debt capital markets. I think you have about $120 million of availability now. So that's not quite one full terminal contribution, but it's close. So is there a reason sort of in light of this idea of growth that you made that capital available? Or is it just kind of going back to what you said about black swans and being prepared for rainy days?

One has to be ready for unexpected challenges. We've faced these surprises frequently, making them seem normal. It's crucial to focus on the strength of our balance sheet and to have additional capital ready for potential expansions. The most apparent capital need early on will be evaluating if we need to expand the ethylene terminal. If our projections hold true and volumes increase, additional funding will be necessary for that. It's clear to anyone observing the situation that we wouldn't have constructed this facility for just one million tons; there's a lot of capacity here. If that occurs, we will need more vessels since our current fleet wouldn't support an expansion. The need for capital in international expansion is another logical step. Do we have enough resources? Probably not at this moment. As developments unfold and we gain more visibility into our earnings, we hope our share price reflects the expected appreciation tied to our growth potential. This should allow us to fund our promising growth and profitability period. I’ve shared a lot, but I'm not sure if I covered everything fully.

Yes, I think the key takeaway is that there's significant potential for growth at our current facility. I was also suggesting that there might be another location in the future, but that's likely a bit further down the line. Regarding my last question, you mentioned that there was some disruption in usage during October, and you provided an update indicating a current utilization rate in the mid to high 80s. With about half of this quarter already accounted for, I'm interested to know what the blended utilization figures look like for the first half of November and October.

Yes, October was higher than the third quarter, but we see the trend going north through November and also into December. So where it is at today is the mid- to high 80s percent level. Whether the average at the end of the quarter will be that? I certainly hope so, but that's the direction of travel.

Sean, sorry, just to come back on your previous question about the opportunities. We've got a lot of opportunities in the business, both, as David said, typically, the best debottleneck is a free debottleneck where you spread the assets, and we're pretty confident we can at least get 10% adjusted capacity at our current footprint at Morgan's Point. And then the next best one is if you expand in an existing facility because the cost per ton of installed capacity is dramatically reduced. So that's a good opportunity. But equally, in this marketplace with low share prices and low profitabilities, there's other opportunities out there as well in the traditional shipping market. So we're looking at all those options and assessing them, but there's nothing imminent in the pipeline today.

And your final question comes from Randy Giveans from Jefferies.

I guess 2 questions from me. First, any updates on Repauno or Pembina? I know those have been kind of in the pipeline for quite some time here. So seeing if you have any moves on those.

Yes. The Pembina project is still set to begin operations at the end of the first quarter, likely in April next year. There has been no change regarding the volume or specifications, which will require 4 to 6 additional handysize ships, depending on the destination of that Canadian volume. According to our discussions with Pembina and their public announcements, everything is proceeding as planned. Regarding Repauno on the East Coast in New Jersey, they have completed their terminal and are starting to fill it. They have a cavern for LPG and plan to initially trade domestically to gain experience before expanding. They have also stated their intention to begin exporting around the same time as Pembina, which is significant for our business. Therefore, if both Pembina and Repauno start operations at the end of the first quarter next year, it will provide a substantial boost to our segment.

Got it. All right. And then I guess, one more quick modeling question. In terms of interest expense, that continues to fall here in the last 3 or 4 quarters. So is this kind of current number, the $9.8 million or so, a fair run rate, which we use for the fourth quarter? And same for G&A, that has certainly bounced around this year. Where is that going to shake out this quarter and then maybe a run rate for '21?

The interest charge should be similar to Q3. There has been a slight decrease in interest rates from Q3 to Q4, but the debt on the terminal has increased, resulting in additional interest. These factors will generally offset each other. The G&A components I mentioned suggest that the Indonesian rupiah amount is unlikely to repeat itself, as it has decreased somewhat. Therefore, we can expect a reduction in that area. The additional insurance for the terminal will stay the same, and audit-related fees will recur to some extent, but not at the full previous amount due to a catch-up effect.

And we now have no further questions.

Good. Well, thank you for joining us this morning, and we welcome you back in a few months' time. Thank you.

Thank you. That does conclude today's presentation. Thank you for joining. You may now disconnect.