BRP Group, Inc.
Q2 2015 Earnings Call Transcript

Published: 9 Aug 2015

[Operator:]

Thank you for standing by. This is the Chorus Call Conference operator. Welcome to the Brookfield Residential Properties Incorporated 2015 Second Quarter Conference Call. As a reminder, all participants are in a listen only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions. [Operator Instructions] At this time, I’d like to turn the conference over to Mr. Alan Norris, President and Chief Executive Officer. Please go ahead, Mr. Norris.

[Alan Norris:]

Thank you Good morning, everyone. Thank you for joining us Brookfield Residential 2015 second quarter conference call. With me today is Craig Laurie, our Chief Financial Officer and Thomas Lui, our Vice President and Corporate Controller. This call is intended for current holders and beneficial owners of Brookfield Residential’s debt securities, as well as prospective investors, securities analyst, market makers and other interested parties. I would, at this time, remind you that in responding to questions and in talking about new initiatives and our financial and operating performance, we will make forward-looking statements, including forward-looking statements within the meaning of applicable Canadian and US securities laws. These statements reflect predictions of future events and trends and do not relate to historical events and subject to known and unknown risks and future events may differ materially from such statements. For more information on these risks and their potential impact on our company, please see our historical filings with securities regulators in Canada and the US and the information available on our website. In the second quarter of 2015, we continued to build on the momentum of the first quarter, with home closings 26% higher compared to the same period last year. The increased closings were primarily fueled by a stronger US housing market. More importantly, we continued to advance a number of our projects through the development cycle, positioning them for future monetization either through our own housing activity or through lot sales this year or next. On the market front, US markets continued to gain momentum in the second quarter with stronger employment and higher disposable income credited for the rise in single family home sales. Importantly, the data also showed an increase in the number of first time buyers entering the market, a healthy development that points to a more solid housing recovery going forward. This has proven to have a continued positive effect as a portion of our current product offering addresses the entry-level market, particularly in the California market, which contributed to US net new home orders being up 56% thus far in 2015. Our housing operation in Canada has remained stable year-over-year, with continued demand in the Edmonton and Ontario markets. While depressed oil prices have resulted in a reduction in activity in Calgary’s energy driven market, home prices remained relatively stable across most of our Canadian operations, particularly in the affordable sub-sector of the market that we target in Alberta. Our land operations in Alberta have however been affected with lower lot sales to third party builders who tend to focus their product on more mid-market housing. Consumer confidence has been affected more negatively in this market segment than others due to the low energy prices. As we report on our overall results in US dollars, we also encountered some variability through the translation of our Canadian operations with the recent decline in the Canadian dollar. During the second quarter, we continued to execute on our capital plan with the issuance of US$350 million corporate senior unsecured notes due in 2025 and C$250 million corporate senior unsecured notes due in 2023. The proceeds from these offerings were used to reduce the amount drawn on our revolving credit facilities and place cash on the balance sheet. In addition, we extended and increased our revolving credit facility to $275 million, providing us strong liquidity as we move forward. Overall, we believe our diversity, both geographically and in terms of product mix, continues to serve us well. We continue to advance our strategy of reducing our land inventory to an 8 to 10 year supply over time, and we use the additional cash flow provided by this strategy to service debt and take advantage of new opportunities, including the expansion of our homebuilding operations. As we move forward, we are encouraged by the momentum we are seeing in the US market and the positive timing of the increase in our homebuilding operations. In Canada, we believe the combination of low interest rates and land supply constraints in the major urban areas will continue to support current pricing and counteract much of the slowdown from low energy pricing in Alberta. With over 105,000 lots controlled, approximately half of which are already entitled, we are well positioned for the future. I will now pass the call to Craig and Thomas to speak to our financial results.

[Craig Laurie:]

Thank you, Alan. And good morning, everyone. Brookfield Residential had strong operating results in the second quarter of 2015. The decrease of $24 million in net income attributable to Brookfield Residential for the three months ended June 30, 2015 compared to the same period in 2014 and was primarily the result of $24 million decrease in gross margin due to lower housing and land gross margins. Additionally there was a $4 million in sales and marketing expense, $2 million increase in interest expense, a decrease of $3 million equity earnings and unconsolidated entity, and a $4 million decrease in other income. This was partially offset by $1 million decrease in general and administrative cost, a decrease in income tax expense of $11 million, and a decrease in net income attributable to non-controlling interests and other interests in consolidated subsidiaries of $1 million. Our housing revenue and gross margin were $244 million and $46 million, respectively, for the three months ended June 30, 2015, compared to $240 million and $55 million for the same period in 2014. The increase in revenue was the result of 108 additional home closings with increased closings across all operating segments, partially offset by a 19% decrease in the average home selling price. The decrease in gross margin was due to a decrease in the average home selling price, primarily due to a shift in product mix in our California markets. In Canada the second quarter housing revenue decreased $2 million when compared to the same period in 2014. The revenue decrease resulted primarily from a 13% decrease in average home selling prices, partially offset by the closing of 30 additional homes, for the three months ended June 30, 2015 compared to the same period in 2014. The decrease in the average home selling price was partially attributable to a higher proportion of home closings coming from the Edmonton market, which typically has lower average selling prices. And the coming presentation currency at US dollars, the 11% decline in the foreign exchange rate between the Canadian and US dollar resulted in a lower translated average home selling price. When comparing the average home selling price in Canadian dollars to each Canadian market for the three months ended June 30, 2015 to June 30, 2014, the average home selling price was $373,000 compared to $381,000 in the same period in 2014. Gross margin decreased $3 million for the three months ended June 30, 2015 when compared to the same period in 2014, primarily as a result of the change in foreign exchange rates, combined with an increase in incentives offered on homes closed in the Calgary market. This was partially offset by the increase in home closings. Our California segment had housing revenue of $99 million for the three months ended June 30, 2015, a decrease of $19 million when compared to the same period in 2014. The decrease in revenue was due to a 27% decrease in the average home selling price, partially offset by 17 additional home closings for the three months ended June 30, 2015 compared to the same period in 2014. Gross margin decreased $9 million when compared to the same period in 2014 as a result of the decrease in the average home selling price. The decrease in average selling price is primarily due to mix of homes sold, particularly in the Bay Area, where current active communities are selling a higher proportion of entry-level homes with lower average home selling prices, compared to previous communities with average home selling prices over $1 million in 2014. The Central and Eastern US housing revenue increased $25 million for the three months ended June 30, 2015 when compared to the same period of 2014 as a result of increased activity and the acquisition of Grand Haven Homes in the first quarter of 2015, which produced 35 home closings in our Austin, Texas market, which had no home closings in 2014. Gross margin increased $3 million when compared to the same period in 2014 due to higher home closings, partially offset by lower average selling prices. The decrease in the average home selling price is due to product mix of the homes closed in different communities across the operating segment when compared to 2014. As of June 30, 2015, the backlog value increased compared to the same period in 2014, primarily as a result of the unit increase and product mix, where there were more homes in backlog from higher priced homes sold in California communities, as well as 104% higher backlog units in the Central & Eastern US segment, partially offset by lower backlog value in the Canadian operations, primarily due to a decrease in the foreign exchange rate between the Canadian and US dollar. Our Canadian operations also had a decrease of 34 units in backlog, primarily due to a decrease in net new home orders for the six months ended June 30, 2015. The California segment’s increase of 115 units at June 30, 2015 was mainly due to higher net new orders in the first half of 2015. The Central and Eastern US segment’s increase of 155 units at June 30, 2015, when compared to the same period in 2014, was mainly due to 95 units in backlog in our Austin market from the acquisition of Grand Haven Homes in the first quarter 2015, compared to no backlog units in 2014. Additionally, backlog units in Denver increased by 57 units when compared to the same period in 2014. I'll now pass the call to Thomas to speak to our land operations and balance sheet.

[Thomas Lui:]

Thank you, Craig. And good morning. Land revenues totaled $67 million for the three months ended June 30, 2015, a decrease of $14 million when compared to the same period in 2014 and land gross margin decreased by $15 million to $28 million. The decrease in land revenue and gross margin for the three months ended June 30, 2015 was due to lower average lot selling price as a result of product mix, where there was a decrease of 193 single family lot closings in our Canadian segment, which typically has higher average selling prices compared to most of our US markets. This was partially offset by higher lot closings in our California and Central and Eastern US segments combined with higher average lot selling prices in our California market. Revenues are affected by local product mix and market conditions which have an impact on the selling price of our land. Looking at results by operating segments, land revenue in Canada for the three months ended June 30, 2015 was $22 million, a decrease of $42 million when compared to the same period in 2014. The decrease was primarily the result of 193 fewer single family lot sales in 2015 when compared to the same period in 2014, as well as an 18% decline in the average lot selling price. The decline in single family lot sales is primarily due to economic conditions in the Alberta market from depressed energy prices. Gross margin decreased $22 million to $17 million when compared to 2014 primarily as a result of the mix of lots sold with fewer single family lot closings, lower average single family lot selling prices and lower per acre selling prices for multi-family, industrial and commercial acre sales. The lower average selling prices for single family lots is partially due to product mix where there was a higher proportion of lot sales from the Edmonton market which typically have lower average selling prices than the Calgary market. In Californian, land revenue for the three months ended June 30, 2015 increased by $18 million when compared to the same period in 2014. This was primarily the result of 69 additional single family lot closings in the three months ended June 30, 2015 compared to the same period in 2014. Gross margin increased $3 million when compared to the same period in 2014 as a result of higher lot closings combined with an increase in the average lot selling price, due to the mix of lots sold within the segment. Turning to Central and Eastern US segment, land revenue increased by $10 million and gross margin increased by $4 compared to the same period in 2014. This was due to an increase of 177 additional single family lots across the segment, partially offset by a 29% decrease in the average lot selling price when compared to the same period in 2014. The decrease in the average lot selling price was due to product mix, with a higher proportion of lots closed in the Austin, Texas market, where our current active land communities have lower selling prices relative to other markets within the segment. Moving to our balance sheet. Our assets as at June 30, 2015 totaled $3.6 billion. Our land and housing inventory and investments in unconsolidated entities are our most significant assets with a combined book value of $3 billion, or approximately 83% of our total assets. The land and housing assets increased when compared to December 31, 2014 due to acquisitions of $221 million, development activity and stronger backlog, partially offset by sales activity. Our land and housing assets include land under development and land held for development, finished lots ready for construction, homes completed and under construction and model homes. Taking a look at our liabilities and equity. Our net debt to total capitalization at June 30, 2015 was 56%. The increase when compared to December 31, 2014 was primarily a result of issuance of C$350 million corporate and secured notes and the US$250 million corporate and secured notes. That wraps our review of financial results for the second quarter. Thank you for joining us in the quarter end conference call. And I'll now turn the call back to the operator who will moderate questions.

[Operator:]

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Thank you. Our first question is from Susan Berliner from JPMorgan. Please go ahead.

[Susan Berliner:]

Hi, good morning.

[Alan Norris:]

Morning.

[Susan Berliner:]

So I guess I wanted to start up with what's going on in oil. And I guess, just to hear from you what you're hearing from your customers with regards to, land sales and even housing in the Calgary market. I know you've talked a lot of shift to on products, lower price terms, and we've heard a lot in Houston. So I was wondering if you could just kind of tell us what's going on, are customers going back a lot on purchasing more on the high end, are they – are you seeing any cancellations anything like that would be helpful?

[Alan Norris:]

Yes. Good question. It’s Alan, here. And yes, I think speaking from a – and first of all from a Calgary point of view, I would say that the affordable end of the product segment, I would say is sub-4000. And we haven’t noticed a significant drop off, until I should have – the consumer is still buying at that affordable end of the marketplace and that’s where we focus a lot of our housing operations in. And so we offered some incentives at the beginning of the year and to move some spec products when we know and energy price is dropped off. We haven’t really had to move that incentive much over the last six months to actually continue to move product and sell to consumers. So I would say that sub-400 market is doing well and in Edmonton its doing extremely well, in fact with the best sales in the first six months of our company up in Edmonton from a housing point of view. When the challenge is Sue is, is in that mid-market and that traditionally is where we sell lots to third party builders and obviously as we segment our product within our communities, and we will maybe focus a lot more on the affordable end and we will sell some – a lot of the lots to the third party builders who are focusing in the mid-market. That’s the challenging area right to this point in time and in the Calgary marketplace. Anything from say 450,000 to say 850,000 on a housing product is definitely a slower part of the marketplace. It’s a little bit more discretionary and people are making a choice if they don’t have to move, they don’t – they are not making that move right now. Those builders also have some lots coming into the year and candidly just what the prospects of energy pricing they said were not going replenish a lot until we got better sense as to where the market is, they are suppose to loading themselves up with more lots. So they backed off on buying lots for a period of time. We're starting to see some traction over the last month or two as they've eaten through the lot supply that already have coming into the year and now are starting to buy lots even in that mid-market area. There is still a market that is just a bit slower than other ones was. And again, that’s mostly in the Calgary market, the Edmonton one is actually performing at a decent level. But its – the Brook [ph] energy related markets. So it’s tough to say what the future is going to bring. Obviously with volatility we have in energy pricing, but there is some concern from a consumer confidence point of view with respect to where things are and that’s plus hesitating some of those mid-market buyers.

[Susan Berliner:]

Okay. Great. That’s was helpful. And I guess just turning your common team on the calls have been labor issues, I know Denver is definitely been sided, and I guess with regards, I am assuming it will stay on the US op, so there correct me if I am wrong on Canada? And I was wondering if guys could talk about what you're seeing the US markets with regards to any concerns on the labor side and any market?

[Alan Norris:]

Yes. I mean, you bang on with respect to the Denver situation. I don’t think it’s just us as a home builder there, being relative new engine on the housing side, many of the home builders in Denver are experiencing the same situation. Having point noticed, we thought that perhaps with a slowdown in energy they might be a little bit more of a giant step from some those employees from the oil products, maybe back into residential, haven’t noticed much at this point as we speak. Most of the other markets not as many challenges. There could be some a little bit obviously in California. But, so far our operations are performing well with respect to build times. But there could be some future pressure because California’s is actually doing quite well in both north and south at this point. So there could be future pressures, but we are not noticing ourselves. Denver is the challenge right now, I think for most.

[Susan Berliner:]

Great. I just had two other questions. I was wondering if you could comment on a couple of specific markets. There is been some, I guess, a little bit mix commentary on Austin and then I was wondering any improvement in the DC market from your perspective?

[Alan Norris:]

And first of all Austin, we're not seeing any spillover in Austin from what I call the Texas oil, oil issues, and we are in the process of opening up two new communities down in the Austin market as we speak we'll be opening it up in the next. One of them we just opened and the other to one will be late, the other next year, and the other one later next year. And we still – there is some pretty good traction from builders expressing their desire to be in those communities and we've got some pretty good activity in our communities going forward. So I am not, its not – I am just not noticing much in the Austin market from a negative point of view. The DC market is some what choppy I would say, I mean, I think echo and perhaps comments we've made before and others, some of our competitors as well. I mean, I think those are a lot of builders competing and it’s to me those some challenges achieving the margins – I think we would all expect to achieve in that marketplace. But a little bit choppy and I think some of its just – I am not sure whether we can prove them to – to government or anything else with respect to that. It’s just, it’s little bit choppy for most in that marketplace now to suggest.

[Susan Berliner:]

Great. Just one last question, I guess for Craig, with regard to I guess, you future strategy on FX hedging, anything you can talk about there?

[Craig Laurie:]

Sure. So, there is obviously two forms of, call them FX hedges, so one is income statement and one is the balance sheet. In terms of income statement, it’s hard in our business because obviously you don’t have, simply that commercial property business where you have a 20 year lease, you can basically hedge out the lease. Obviously ours is individual transaction. So we focus on is working towards a balanced, a hedged balance sheet to an extent or at least working towards that. We do it from a natural point of view. And so what we do is we try to match as much we can. Our Canadian exposure with Canadian dollar debt, certainly we're not one to one. We're currently long Canadian dollars on the balance sheet, but that is our target that we try to look with a natural hedge from Canadian dollar debt against the Canadian dollar assets.

[Susan Berliner:]

Got you. Thanks very much.

[Craig Laurie:]

Thanks, Sue.

[Operator:]

The next question is from James Fanady [ph] from Citigroup. Please go ahead.

[James:]

Hi, Thanks for taking our question. This is Mini Shawn for James.

[Alan Norris:]

Okay. Morning.

[James:]

Hi. So there is been some M&A in the home builder space, most recently with Dan Ryan and Standard Pacific. Could you talk little bit about your appetite and your thoughts on larger M&A versus kind of smaller tuck-in acquisitions, like Midwest Grand Haven, which would be a priority for you, which you market looks most attractive?

[Alan Norris:]

I think, I mean, the Stan Pac and Ryan deal are guess, [indiscernible] because its cold, I am not quite sure. But there is obviously rough feeling substantial merger of two large home builders. I mean, I think our focus we're very comfortable with the markets that we are in, at this point we also think as you can see from the growth that we're doing with on our home building operations in Denver, what we're doing Austin, we've got a lot of room that we grow organically within the markets where we currently do business. Its an exceptional opportunity presented itself, obviously we could look at that, but it’s not something that I would say first and foremost on our – or mind at this point. We have the opportunity to grow home building and our lined operations as we've touched on before. We are looking at other mix fusion and co-opportunities in some of the markets where we currently do business. So I think we've got – we've got the intellectual capital in most of those markets with very, very good operators in of all our regions and we think we can use that to our advantage and we've got the capital. We're extremely well capitalized as you are well aware. So I think we've got great opportunities within where we are today, not to this missed anything, but its not – I would not say it’s the front center that we have to do something, it was prime to any stretch. We're extremely well positioned right now.

[James:]

Very helpful. And then I guess, in terms of your entry level offerings in Bay area, and you've got your presence in that segment, can you go, just for moving forward, should we expect Bay is using gross margin in that segment or had to do with this last quarter?

[Alan Norris:]

I apologize, I missed a little bit what was, did you say entry, did you say entry level in the Bay area?

[James:]

Yes.

[Alan Norris:]

We don’t have – I guess, we've got a number of different projects going in the Bay area. I mean, a lot of the entry level that we are talking about from a California point of view is far mostly in southern California. We know the entry level in northern California has a whole different meaning, than it does in most markets, across North America because of the high pricing in Northern Cal. We've got a few projects in the Bay area which we think address that and but I would say that a lot of the – will turn in California, the southern Cal and Inland Empire, with the Audie Murphy and Spencer's Crossing and things like that. So I mean, I think we will be trying to – I mean, I think most people often the Bay area are obviously trying to address that entry level through different forms of product and we are continuing to do that with a number of acquisitions that we have in the wings going forward that will address more affordable product in the Bay area. So we're quite positive in that market at this point.

[James:]

And then just a couple of housekeeping items. Do you expect the higher level of SG&A going forward with I guess, given entries and not on those business?

[Alan Norris:]

Ill let Thomas touch in a minute, but I think, I mean, obviously the SG&A is going up because our housing is going up and that’s the direct correlation with respect to that because the bulk of SG&A is – has a direct delineations back to housing revenue, if there is anything to offer Thomas?…

[Thomas Lui:]

To Alan's point if you take a look at our SG&A for the three and six months, to G&A component has remained relatively flat, if not slight down. The weighted portion of - the increase of it is through the sales and marketing and that’s exactly to Alan's point with the increase in housing activity, we just have higher commission enrolling cost that are recorded.

[James:]

And then just for the land sales, can you give us any outlook for land sales in second half of the year and do you expect margins to be roughly similar to second quarter?

[Alan Norris:]

I mean, I think land sales are always choppy and I mean, it depends by market, but we're feeling very good about the last half of the year, I mean, obviously a lot of other things happened in the first half, like that going private transaction issuance of new north switch basically capitalizes, these are extremely well. And obviously we've got some cash on the balance sheet to this point which is creating a somewhat a negative yield in the short run, but it sets up extremely well. We've got some a number of transactions in or throughout the US with respect lots sales that we typically do, and it – we're selling to builders who then buying in the latter half of the year and saving themselves up for spring selling season in 2016. And I think most are looking positively towards the spring selling season of 2016 and therefore have to – we'll be loading up to some lots at the end which we already – we are already underway with a number of those builders right now.

[James:]

Thank you.

[Alan Norris:]

Thank you.

[Operator:]

[Operator Instructions] Our next question is from Sam McGovern from Credit Suisse. Please go ahead.

[Unidentified Analyst:]

Hi, guys. This is James on for Sam. Just going back to Calgary, I just want to see has the weakness in the Calgary market accelerated in recent months or would say that demand is stabilized? And then also have you seen the weaker C dollar, has the weaker C dollar versus kind of the US dollar shifted any foreign investor demand toward Canada at all? Thanks.

[Alan Norris:]

Yes. I would first of all on the Calgary side, I would say we're poised little bit more traction over the last month or two quite honest. And the affordable investment fairly consistent over the six or seven months. On the mid-market we've seen a little bit of an up tick recently and I want to – I think which I didn’t respond in earlier question was the product above a $1 million and the housing product is actually still moving fairly well in the Calgary marketplace on the new home side. So it’s that gap in the middle, but we have seen a little bit more traction, May, June and somewhat in July, even on that mid-market I would say. So nothing sort of – its not – it’s probably a slight improvement over the last few months versus where it was at the beginning of the year. Some of that again is – I mean, that’s the answer there. With respect to the FX, as foreign investors haven’t noticed much in what I would call the community side, in Calgary or Edmonton, perhaps moving in some of the multi-family down town in Calgary. But probably more of an influence in the Toronto area in Canada, definitely in the high rise business which are not in. But I would say that there is still a chance some of it – something an impact on the low rise business in Ontario as well. But very difficult to identify that when people are buying homes, in many case if they – they are buying it for shelter where the money is coming from abroad and its existing relatives who are living in it. But definitely it’s not speculative where nobody moving into the home, somebody is moving in. In our case it’s just a question of where the money is coming from. And obviously with the dollar where it is, we become a very attractive investment opportunity for foreign money.

[Unidentified Analyst:]

Great. That’s really helpful. And then in terms of uses of cash, how do you think about reinvestment in land versus delivering and as you increase your mix towards home building from development and reduce the number of years in your land supply, do you think the business can operate at a higher leverage over the cycle?

[Alan Norris:]

Yes. A few points in there. So I mean, I think yes, as we're building the housing business right now, obviously it takes a little bit of capital because we're – we're not taking on any project that obviously for any of the housing initiatives, we're just using our existing liquidity. So that takes a little bit of capital. Then we get into what I call the steady state and that will continue to generate significant amount of cash. So we'll look at land opportunities when necessary, but we're – as you well know, as you said we're very well positioned, some of the cash will be utilized building up those housing operations to get to that good critical math on a region by region basis. With respect to sorry, I am just going back on your other points, it was delevering question, and the second one was?

[Unidentified Analyst:]

I was just wondering if moving to mix towards home building fund development, if you think you can kind of operate at that higher leverage over the cycle?

[Alan Norris:]

Yes. I mean, I think, what we believe is with the asset mix that we have currently, we think our debt to cap – net debt to cap should be in that 50%, 55% range. Obviously if we take a little bit more out of the land business, if we monetize some there and build up a little bit more on the housing, it would imply that you could take on slightly higher leverage because this are more short term asset, as opposed to long-term. That’s not something we focused on that much, I mean, we're obviously just building up the business. We're still targeting into those 50%, 55% and net debt to cap. We think that’s appropriate at this point. Obviously it still takes a little bit of time to get to us, slight shift in the asset mix and not [indiscernible] I mean, obviously the more you lend toward short term land and monetize both, short term loan and housing you can pick – I mean, a little bit leverage on that. Our philosophy is not to have any implied leverage against our undeveloped land. So if you have less on the undeveloped land, it implies that it could be slightly higher than that, but it’s not something that we are focusing on at this point. We'll continue to try and get net debt to capital and what we think is the appropriate level.

[Unidentified Analyst:]

Okay. Great. And then the last one from me, is have you heard any concerns regarding your potential rate rise in the US from the builders you sell to or has the builder demand been relatively stable?

[Alan Norris:]

No, I would say that both of the demand is been fairly stable. In fact it’s probably increased over the last quite a while. And I think we've all been waiting for daily bread for the site to do something. We'll have [indiscernible] September, October. I mean, I think it’s – let's just move on. I mean, I think there is enough positive indicators from an economy point of view and things, yes, I mean, those are few challenges out there. But the reality is that, I don’t think we're too concerned and in the short run with respect to that. There is still a tremendous amount of affordability left in the marketplace in housing.

[Unidentified Analyst:]

Great. Thanks, guys. I appreciate it.

[Alan Norris:]

Thank you.

[Operator:]

There are no more questions at this time. I will now hand the call back over to Mr. Norris for closing comments.

[Alan Norris:]

Okay. Thanks very much everyone for attending the call. We look forward to chatting to you at the end of the third quarter. So thank you.

[Operator:]

This concludes today’s conference call. You may now disconnect your lines. Thank you for participating and have a pleasant day.