The Weir Group PLC

Jon Stanton - Chief Executive Officer John Heasley - Chief Financial Officer

Lars Brorson - Barclays Max Yates - Credit Suisse Mark Davies Jones - Stifel

Good morning everybody and thank you for joining us at short notice. I'm joined here today with our Chief Financial Officer, John Heasley, and we will be walking through the slide deck that you should have in front of you.

So, we’re excited to be talking today about large acquisition in the mineral space and our intention to sell the flow control division. I have signaled our intense over the last two months to build on our strengths around the abrasive applications and minerals and oil and gas with large aftermarket center and this acquisition is a major shift in that direction, which gives us real focus as we go forward.

So, the acquisition we are announcing this morning is escrow premium brands in brand engage tools. The global market leader with 40% share of surface mining and a razorblade mid business model which drives 90% of revenues from the aftermarket.

A great business with incredible parallels to the minerals division driven by the mixed-critical nature of products and the ware life and intense applications that this exposed to in the mine, this moves us upstream from our current position into the pit, into extraction and materials handling and with the disposal pf flow control that we have announced in terms of our intention really focus of the portfolio on those highly abrasive aftermarket intensive applications. We created by bringing these two businesses together a unique mining services provider, positioned across the best fits of the mine will be the only provider of mission-critical solutions from extraction, concentration and playing to the theme of supply consolidation, supply chain efficiency as it is attractive to our customers.

This acquisition will drive significant value creation opportunities, our base case includes $30 million of cost synergies around 5% of revenues and the base case excludes further benefits to come from long-term value creation in terms of revenue synergies, technology combinations and the potential to further develop the platform from where we are in terms of what we’re creating today. The transaction meets our financial criteria at 12.6 times EBITDA in 2018 it’s a good price given the timing of the acquisition on the potential upside but the transaction will be EPS accretive in its first full year and the returns will be the average cost of capital in year three.

Consideration mixes is 41% equity to the ESCO shareholders, 59% cash, is a high proportion of equity joins the ESCO shareholders, reflecting the fact that they are excited about the story that they want to own the shares going forward and be part of the upside. The cash element will be finance through our debt facilities on 7.4% pricing which has gone live this morning.

The whole financial package is design to deliver as net debt to EBITDA, we’re on two times by the end of the year. And that’s before the disposal of flow control which will come on in terms of ongoing process.

So, the financials are good, strong base case a real story in terms of what we create and where we can go from here. Obviously, a nice acquisition and the placing we pulled forward, our Q1 IMS by a week.

And the headline there is strong order of momentum in the first quarter, a good start to the year which underpins our guidance which is unchanged. So, in summary an important moment for Weir, drives real focus in our portfolio, it’s the right deal at the right time, a great fit for our business but strategically and culturally and significant upside in terms of value creation.

Moving on to Slide three and looking at our ongoing portfolio. In minerals and oil and gas we got market leading franchises with high barriers to entry, supported by strong fundamentals in terms of production and demand for the commodities that are exposed to and we got great capability in those businesses, our knowledge of hydration [ph] applications, mission-critical situations for our customers which drive a higher after market content, top quartile margins and highly resilient business model.

Flow control is a good business and it is turning a corner but it has niche positions and it need scale. The strength of minerals in oil and gas means that they attract the capital, so we concluded that the flow control deserves a better owner, that can give more scale and give the capital that they deserve to grow and move forward in the future.

So, we have not yet commenced the process we’re at very early days with that, but we will aim to maximize shareholder value and find the right owner for the business as the process commences and we will judge the nature and timing of that process based on the reaction we get from potential buyers over the course of the next few days and weeks. Moving on to Slide 4, so what is ESCO, it’s a large independent company which is family-owned and has been so for 105 years, the large business with 2600 people around the world.

Operating out of 19 countries and as I said earlier the number one brand in ground engaging tools, which is a classic razor razorblade business model just like with minerals business, which drives 90% of the aftermarket. In terms of how that model works, the bit on the slide on page 4, such as lake [ph] system is the razor and the green pieces which is brand engaging tools are the razor blades which is the consumable but drives the aftermarket.

What are they, ground engaging tools, where are the highly engineered consumable both used on the front-end of surface machines, their mission-critical nature drives yield from the pit into the combination process and they have significant technology differentiators. So, the geometry of the brand engaging tools, the metallurgy in the brand engaging tools drive yield from the mind and drives Weir life out of the tool.

These fits of the tools to the lift system is absolutely critical. If the tool detaches and goes downstream into the crusher for example, it can seriously damage a million dollars' worth of equipment and of course the mine would stop operating.

So, it's really, really important to be piece remain attached to the lift and the fit is critical in doing that. In addition, ESCO has proprietary locking systems for their brand engaging tools which means that they can afford very quick changeover.

So, for the customers in terms of value proposition, the ESCO product with those technology advantages it moves more, last longer applicable change and it doesn’t go off which drives a lowest total cost of ownership which is at the absolute focus of our customers and an absolute parallel to what to see in the wet processing circuit with the pumps. Moving on to Slide 5 and looking at have ESCO fits with the existing minerals, we start on the right-hand side, you can see our existing leading strong position in the mill circuit, in the middle are developing as dry processing in combination which we’re developing with the trio [ph] business and a high pressure grinding roll technology and ESCO takes one step further upstream into the pit into extraction and materials handling.

And this is really the core of the mine site, it’s where the aberration is, it’s where the way life of the service support is absolutely critical, so it really place to our existing strength in terms of being aligned with our current business model. And create a unique combination with a very strong customer proposition across the mine site.

Turning to slide 6, just to give you a brief example of the razor blade business model which drives that high proportion of revenues coming from the after-market. This slide shows the nemesis loop again exactly the same business model as pumps in the mill circuit.

Once the loop is installed the proprietary fit and locking systems the consumables have to be at ESCO so driving that annuity aftermarket revenue stream. So, over the life of the loop system it’s five or 10 years it will generate 5 to 10 times the OEM value in aftermarket sales.

On average you can see from the numbers for a [indiscernible] the life cycle might be around five weeks and really extremely greater application such as the oil sands which is where we see high aberration as well, this product can last for no more than eight hours before these needs to be changes, which comes back to that very high after-market content in terms of revenues. Moving on to slide 7 so trying to get into the adjacent to where we are in the mine it’s in the sweet spot business model and ESCO is the global market leader in this technology.

We recognized the large acquisition and we needed to be certain cultural fit and our ability to integrate well to drive the value creation. And so, we spend a lot of time from a diligence point of view looking at the culture and values of the business alongside.

The core financial IT tax legal and so on and new find a business with huge parallels to its long family owned history, its commitment to innovation and technology, a world class leadership team, very strong corporate governance. And so, the prices are getting to know ESCO, we spent several months in that process.

We have had terrific assets to the business, being able to do complete diligence including meeting many people multiple times. Manufacturing location around the world and a lot of time spend talking about research and development and technology capacities.

So really strong process that we are getting some of the business. I am not sure half fee exclusive.

So, this has not been an option process deal. Moving on slide eight, ESCO as I say is a great business, great strategic fit, great cultural fit, but what we are really excited about is what we create going forward which to me is immensely exciting.

And for that delivering on our financial criteria further value creation opportunities beyond and then in the long-term how we transform our minerals business. I will come back to talk about the growth in transformational options and opportunities.

But first of all, I am going to hand it John who will take you through the financial criteria.

Thank you, John and good morning everyone. Coming slide 9 I will just start with a little bit of data on the [indiscernible] coming on to the transaction from a financial perspective.

You can see here ESCO was a truly global business just be minerals. The 52% for the is US it’s principally driven by top 30% of revenues that come from construction, fiber brigade and infrastructure which is Jon will come back to the same replacement a good opportunity for us going forward.

In terms of the commodity mix, as you know we like hard rock mining. And get gold sulfur and iron ore and as you can see here via ESCO that's not goal that’s almost 60% of mainly revenues stronger commodities.

In terms of the operations it's truly global business and you can see six foundries around the world and all of that is running off a very mature single instance of vertical. Coming to slide 10 and looking at the market as you know we've been talking very positively about the mining markets for over a year now and they continue to see that on the grounds with our quarter one trading and so we feel very strongly that this is the right business to be buying at the right time in the cycle.

We recognize that minerals can be cyclical and so if you look at the on slide 10 you can see that the ESCO business has attract the peer group in terms of Atlas Copco signed back in May so rating wise it's getting the downtime and as we have seen the markets recover we can see that revenue starts to grow in 2018 plus quarter we've based on growth of 12% through the past three months. Coming to slide 11 the tailings for the similar pattern, you can see in 2012 EBITDA margins of 18% and that's conveying to 2015 at the bottom of the cycle just below 10%.

Through that period as you would expect for a period of market leading business gross margins were broadly stable and the reduction in margin over that period was principally volume driven. As a private business we were late to restructure and then the last couple of years we've restructured the cost fees with closing around 5 of 6 foundries and we're starting to see the benefit of that note with margins improving from '16 and into '17 and as we look at 2018 as Jon said we would have good access to the business and a very strong diligence and so following that strong start to the year the business is treating with great momentum and we feel comfortable that we will continue to see revenue and margin growth we expect in 2018 to deliver revenues of around $675 million and EBITDA of around $80 million so for 2018 that represents 16% EBITDA margin and a 12% EBITDA margin.

Looking to the future we see a really strong opportunity in our base case stated assumption to get the ESCO margins from the 12% that we expect this year, towards the lower end of the Weir Minerals margin range and that's really predicated upon two key assumptions first of all mid-single digit market growth that we feel comfortable and confident at any given our knowledge and experience on the driving growth of business in the sector and secondly cost synergies of 30 million by year three which again we have a strong opportunity to diligence and that principally comprises both governance and corporate type costs service centers where we operate in similar locations and we can share facilities and lastly we have a good access to their purchasing cost and supply chain cost and with benchmark it was against our own see opportunities pursuing there. And so those are the assumptions that we've used to drive the financial returns, which if you turn to slide 12 you can see that any in terms of EV to EBITDA multiple against 2018 estimated earnings that I just described 12.6 times including run rate synergies than reduce this to 10 times which we believe is attractive price probably growth on alpha at this point and recycle.

in terms of those base case assumptions that will drive the earnings accretion and approximately through the year and we expect to exceed the cost of capital in the part and full-year. In terms of financing this transaction as Jon mentioned 41% of the consideration will be an equity issued to ESCO shareholders and that will represent about 6% of the large Weir group and of that equity that’s issued more than 50% of that will be subject to lock up for six months post completion.

The balance of the consideration and combination of debt from existing facilities and the 7.4% accelerated bookbuild has commenced this morning. In terms of the bridge to enterprise value we will be assuming $200 million of ESCO debt which we will be financed on completion, and around $30 million of pension liabilities.

Just touching briefly on the acquisition mechanics, we do have unanimous approval for the ESCO board from this transaction, given the friendly nature of the shareholder base there is a long tail, and therefore it does go through formal shareholder vote on 7, May this year. And finally, we expect to close the transaction in early Q3 and that's subject to normal conditions.

So, with that, I’ll hand back to Jon to talk about the opportunities beyond the case that I just outlined.

Thank you, very much John. So yes, so the base case includes the 30 million of assumed cost synergies but no revenue synergies or other opportunities beyond that.

And if you turn to Slide 13, you can see why we are excited immediately about the revenue synergy opportunity. The blue dots represent of course the [indiscernible] global services network where we are within 200 kilometers every major mine site of the world, with the ESCO direct channels more focused in the Americas, in North America in particular.

So, we see from a global perspective some significant opportunities to push ESCO capability and product into the Weir service center network and we already had a number of detailed discussions with ESCO in terms of specific country by country opportunities where we are going to have the opportunity to do that. So, we are very excited as we move into integration to get into the granular detail country by country get our regional sales teams together, to put forward and develop and execute against the revenue synergy opportunity that's available.

Conversely, in North America, ESCO has a very strong distribution channels through third parties which is stronger than we have. And we see that as a great opportunity to actually drive some of our product particularly Trio, crushers and crusher Weir parts into North America, which is a further opportunity over and above the global revenue synergies using our channels.

So, we are pretty excited about the revenue synergy potential, it's going to be available to us as we move forward, leveraging that key competitive advantage that we have in the global service center network. Moving onto Slide 14, on technology, we have also been incredibly impressed by the ESCO technology, and research and development capability.

It's highly complementary to Weir with some fantastic capability. We observed that we both have strengths in particular areas, be they metallurgy, where we are on digital journeys in terms of manufacturing process know how.

So again, getting our engineers and technicians together presents an exciting opportunity to leverage each other's capability. Like Weir, ESCO had kept on investing in R&D through the downturn.

So, they have a great pipeline of new technology coming through which is also potentially very exciting. Some of the higher tech things that they do includes putting GPS positioners in each tooth [ph] so earlier as attachment and then can be very significant in terms of downstream damage.

So, GPS systems allow the operator of the primary machine to be warned if there is detachment and that will prevent downstream damage. Likewise, they are putting sensors and accelerometers in to the teeth, so that they can measure the forces on those teeth as they engage with the material present feedback into the design process.

So, doing some very exciting things and quite aligned with I would say in terms of the IOT journey. Moving on to Slide 15, of course, the earlier we pulled forward our Q1 IMS Bio week reflecting the placing that’s been announced and we had a good start for the year, you can see group orders up 22% with all divisions ahead of the prior year.

Minerals orders up 13% with double digit growth in both original equipment and after markets. Oil and gas orders up 50%, driven by strong demand in North America for pressure pumping products and flow control also up 2% with the fourth quarter of consecutive growth in the aftermarket.

During the rounds, good pleasing starts to the year which underpins our guidance that we gave at the end of February of strong constant currency revenue and profit growth. I want to summarize and conclude with a couple of slides so starting with 16 and sort of stepping back of what we create with the ESCO acquisition that is that we become a unique provider the only provider across the extraction to concentration part of mining equipment value chain and this is really the best bits of the mine.

I think it's compelling because it is what we’re good at, its where the integration and Weir parts are critical, so in terms of way of Weir business model, highly engineered, mission-critical product with intensive aftermarket and global support required. It really picks all our boxes, and we believe what our customers want.

So, comprehensive portfolio solutions that drive productivity to help and simplify their supply chain and with this broader portfolio we have more touch points with our mining customers and that will become more strategically important for them. And importantly, as a platform that we can continue to build on as we move forward.

And turning to 17wWhat they did for the group as a whole it makes Weir even stronger. Going forward, we will have a portfolio of three major leading brands followed by sub brands but globally in franchises in [Mormon, SPM] and the ESCO and with the disclosure to flow control as will niche exposures will of course leave the portfolio.

It means we’re really focused on that highly abrasive upstream markets in mining and oil and gas with more than 80% of our revenues on a pro forma basis coming from those sectors and of course that drives exposures to the resilient aftermarket revenues and again pro forma revenues from aftermarket will move up to around 77%, which drives resilience in revenues and a higher margin profile for the group going forward. As I said earlier the financial package in terms of financing the deal mean that we will be alongside our underlying cash generation at two times, net debt EBITDA by the end of 2018 and that is before the disposal of flow control and proceeds coming in for that acquisition.

So, we will be posted a disposal of flow control and really focused business with the strong balance sheet and the ability to go on from there to further fill that and grow our portfolio. So in summary on slide 18, ESCO is a great business with the license to be welcoming ESCO to the Weir family it's the right time to do this deal in the cycle and in terms of the growth profile that's ahead of us and it's a great fit for us both strategically and culturally, so as I say we are delighted to be and announcing the acquisitions today and the equity placing to supported that.

So, what that I will pause and we have a few minutes for some questions. Thank you.

I wanted to just to get a little more color Jon perhaps on the cost synergies the 30 million I mean I think you talk about leveraging service centers but I didn’t hear huge amount around cost base in ESCO. I noticed that ESCO specifically say that they don’t expect a meaningful change to employee numbers or facilities.

Can you help me little more with the what's the component of the cost synergies and also as the source around ESCOs business model, it looks very veritably integrated fixed foundries, any thoughts around what can drive that cost synergies beyond your service centers that's the first question.

Okay, so the cost synergy is 30 million baked into the bate case and as I said earlier ESCO is almost like a mini public company with board and governance structures that were put in place a while ago and in contemplation of an IPO that it's all in 2011, so there were governance costs in terms of board and functional capability that it will be essentially eliminated and subsequent within Weir. The service centers there will be a little bit of overlap across the service center platforms so it's mostly complimentary but we have duplicate service centers and clearly overtime we will drive efficiency there and there are other corporate costs in the course of the time we will speak to again emergency we are essentially.

So the bate case cost synergies are those versus cost in terms of broader operational platform and our foundry footprint is complementary so for example we do not have a foundry in North America and we always sort of thought was good to have once so we will be able to leverage the ESCO footprint in North America but fundamentally it is a vertically integrated business in the same way that we are [Indiscernible] and that's because security has supply and security have a capacity essentially for the mining customers is really absolutely critical and that's what drives the vertical integration but ESCO as their product is more biased towards steel alloys where is more buyers chrome iron alloys so our foundries are a little bit different so we don’t see that there will be a big sort of restructuring in the operating cost base that broadly complementary. What we will do is the business that we run standalone for probably the balance of 2018 six months or so.

as we go through that process of integration the intent is that we will crack on very quickly with the revenue and cost synergies but use that standalone period to really sort of get beneath the hood of the business, understand the plumbing and think really hard about the strength of ESCO, the strengths of Weir minerals how do we put the two businesses together to create the optimal platform moving forward, that is future proof, scalable and will allow us to go on and take the business forward in a meaningful way.

I presume they are investing into growth in '18 I mean if delivering what looks like 100 basis point or so, and margin improvement this year on mid to high single-digit growth. Can you help me understand what drove the 400 or so basis point margin improvement in 2017?

What was low single-digit growth back then?

So as John said a restructure that business through the downturn, but as a private company, probably weren't as aggressive as we were as the public company. So, I think they got related to their restructuring probably the family-owned nature of the business was a consideration there.

So, I think that the 2017 momentum was really driven by some revenue growth for the benefits of their restructuring playing through driving some margin expansion. I think the really critical thing is, is the momentum of the business has at the moment with the further benefits of their restructuring coming through, the market momentum that they have at the moment which is very strong and consistent with the trends that we're seeing in our business.

So, alongside, further market growth, the cost synergies we see substantial opportunities to improve the margins for further from here.

Secondly, can I ask to the competitive universe who is number two and number three in this market? And what are the key areas this differentiation for ESCO?

So ESCO competes against the OEMs, so Caterpillar, Komatsu, the guys who produce the large primary moving machines and there is smaller independence as well that they also compete with. I think the key differentiator for ESCO is number one, having the sales people and engineers on the mine site, working with customers on the specific ore body and helping to get the right geometry in terms of the ground engaging tool, the right metallurgy in terms of the ground engaging right tool, so that they can drive yield and reduce Weir life which goes to total cost of ownership and the OEMs tend to have a one site tool they don’t have that sales approach in terms of really customization for all the customers.

These are large pieces of metal operating in extreme environments. There is a lot of technology that goes into the metallurgy, the geometry the fit to the lift, and the locking system of course which reduce changeout time.

So, there is a lot of technological differentiation in the ESCO products.

On flow control, can you give me a little more of a sense on where you are in this process, I was bit late on the call but I think I heard you say that you are about to gauge some interest over the next few days or weeks. So, can you just give us a little more color around as specifically where you are.

Yes, I’ll be very quick on that one, Lars. We need to move on somebody else because we haven’t got much time but yes, so we are very early days in terms of the process.

We felt that it was right to be transparent and announce the plans to dispose of the business today alongside the announcement of the acquisition of ESCO. as you quite rightly said we will judge what reaction we get to that in terms of the buyer interest in the next few days and week and we design the process to maximize the value add of that.

Just two quick questions. One follow-up I guess, on the dynamics of competition given you are competing against the OEMs just wanted that if you can make a comment on pricing and how that dynamic has changed past through the downturn.

And then second one just on the underlying business given new group orders are very strong order intake numbers. Just wondered if you could comment a little bit about the sequential development and any comment on pricing in each two divisions would be very helpful.

Thank you.

Good morning, so in terms of the question on the competitive environment then as I said earlier, ESCO has a strong technological differentiation in terms of its market position. We completed extensive commercial diligence as part of the exercises you would imagine and when you get feedback from the customers, competitors, ESCO clearly scales as the number one brand which has technological differentiation and delivers lower total cost of ownership across the modes [ph] and just like they have broadly premium pricing reflected in that position.

That really down turn again like where minerals as the high aftermarket content business, pricing has been relatively stable just like as they not been really able to push prices up through the downturn but that would be an emerging dynamic for the business as we see growth going forward. In terms of the underlying business here, as I said earlier good start to the year.

I think in the mineral, two things that is particularly strong would be the minerals aftermarket and original equipment in oil and gas. At this stage, we are driven by customers coming back to the year with capital budgets and within oil and gas particularly strong pumps and power frames as customers have accelerated the reactivation and bringing fleet online to get ready for the contracts they have for the balance of 2018 but it feels like that a Q1 and certainly not believing at this point is the start of a bigger trend in terms of capital replacement cycle.

In terms of pricing across the business its broadly develop as we expected in the first quarter. So actually, the commentary around oil and gas in particular where we expect only a couple of points of improvement in pricing over the balance of the year we are very much in that environment of course, with more of an OE mix as well margins slightly lower as a result of that mix of offsetting the upside from a revenue point of view, but very much as we expect to nice start we give.

And just my first question is just around the revenue trajectory of the business in a down turn, it looks like there were sort of a couple of years of around 10% growth and I was just trying to sort of square that with kind of where aftermarket is given they do seem to have kind of similar aftermarket content. What really drives that decline because it looks like mine production kind of continue to grow through the downturn, so just trying to really understand is that moves in sort of stock levels, inventories with customers what was really driving that through the downturn given the aftermarket content of the business.

So really as you know the Weir menu business operates in the processing plants in the [Indiscernible] and therefore regardless of their positing on then processing plants is operating and obviously ESCO operating in the path than what you tend to saying that as the bit of stockpiling and then when things get often cost I mean to the core then that is just one base one day in new stock pile so that’s the key difference between the Weir minerals and ESCO as that was just that little bit of a lag as stockpiling is one day and during the deepest of day times but I would emphasize again the chart that shows that this is excluding the rating why you went that peer group with the other mining equipment players to you said just to be minerals [Indiscernible].

And just secondly, I mean this might be a slightly obvious question but I mean you mentioned the competitive [Indiscernible] so presumably the guys have actually make the excavators and therefore I would assume they also put their own sort of they are in buckets on the end of the excavators and therefore have some control over the aftermarket. So, I'm just trying to understand is that sort of interchange ability between the consumables and other manufactures buckets on the end of these excavators and how does that work in relation to sort of servicing other people's excavators and other people's kind of OE products in this market.

There is not really interchangeability between loop system, in other words if I can just step back and just provide the way to sales process work so when the mine is ordering a machine you can either order the machine with the OEM loop system on it or you can supply and ESCO loop systems when it comes with it or you can specify it with just the bucket and no loop system and then you can choose the loop system on the mine side and weld it on. Once you have the loop system that really has been installed base and it's the razor blade business model and then because of the proprietary nature of the fit and locking system it's essentially a captive aftermarket and the consumables revenues flow.

So the sales process for ESCO really having boots on the ground in the mine talking to the people who are making the decision to back buying the mining machine talking to them about lowest total cost of ownership the differentiators that ESCO has in terms of metallurgy, where life, fit and locking systems which drives the lowest hurdle cost of ownership and convincing the customers to specify that they will do the machine with ESCO loop systems business and that's why on those primary surface moving machines on hard rock mining they have 40% global market share I mean they are the number one by quite a margin.

Okay, so the next biggest competitive what may have sort of half of that, is that a fair assumption?

Yes, that’s probably right in terms of those primary moving machines.

Two things. Firstly, I think one Jon or the other John was going to talk to the non-mining part of ESCO.

We didn’t actually get around to that. So, you said that the 30% of the business, can we just address that and whether that’s cool, what the prospects are there.

And then more broadly on the question of sales synergies they are quite distinct part of the mine and the mining process. Is it really credible to think that is going to give you particularly additional leverage over the customers on their rather distinct purchase decisions?

I’ll take your second question first. You are right, we are actually selling to a different customer.

Generally speaking on the mine site, we are often selling into the combination and what process in part of the mine, ESCO is selling into the pit. So, it's a different person you are selling to but it's the same customer, so you leverage the infrastructure that you have.

And going back to the revenue synergies and looking at the map that we looked at earlier. In lots of countries ESCO doesn't have direct representation and will be able to sales capability and stock parts in our service centers where ESCO is not able to go direct at the moment.

So, it's about leveraging the infrastructure albeit you are selling to a different person. But as I said it's the same customer and the overarching it makes you more strategically important across the value chain with the particular modern science.

In terms of the 30% exposure in the construction and infrastructure, a large part of that is in North America. And these are the smaller parts with less technology that go into construction backhoes and smaller moving machines.

And so, at the moment it’s a meaningful business. And ESCO uses it to essentially create load in their foundries, which recovers overheads.

Over time, is there an opportunity to direct more of the capacity towards copper, gold, hard rock mining the higher-tech part of the business, yes that's right. So that maybe the direction of travel but we will judge that as we move into integration.

There are also some really, really exciting bits within that piece as well. So, if I go back, if you look at the slide on the Page 4 we talk about dredging I mean they are the global leader in dredging by some considerable margin and that is an area where there are exciting growth potential opportunities going forward.

I think you have port and harbor development thinking about offshore wins where there are lots of opportunities emerging and that’s a strong leading position with higher margins. And so, I think I need to wrap up and moving on, sorry guys, because I know there are a couple of people still waiting to ask questions but thanks again for joining the call at short notice.

And I’ll repeat my comments ESCO is a fantastic business, great fit for Weir. It takes us forward significantly, strategically driving the focus that will come alongside the Flow Control.

And we're very excited about the value that this will create for our business going forward. So, thank you very much for your time and we will catch up with you later in a day and a date.