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Hello, and welcome to the Ashtead Interim Analyst Call. Please note, this call is being recorded. [Operator Instructions] I will now hand you over to CEO, Brendan Horgan, to begin today's conference. Please go ahead, sir.
Good morning, everyone, and thank you for joining our half year results call. I'm here with Michael Pratt and Will Shaw in our London office. Today's update will detail our strong performance in the period, review our outlook for the balance of the year, detail the latest end market forecast and cover, of course, the execution of our strategic growth plan, Sunbelt 3.0, which from a timing standpoint, we're actually at the halfway mark.
Before getting into the slides, I'd like to speak to our Sunbelt team members throughout the business to thank them for their engagement. We recently completed our latest engagement survey which garnered an extraordinary response from over 18,000 of our colleagues throughout the organization. The response rate alone is impressive. However, more so is the cultural feedback around topics such as safety, family, belonging, and customer focus.
Another example of engagement is the success of our tenth Annual Safety Week held across the U.S., Canada and the U.K. This year was the week of October 3. And as I witnessed firsthand in many branch locations and through the countless posts via our internal engagement app, our people were not just present, they were engaged. Whether it's events like Safety Week or working together as a team to respond to natural disasters like Hurricane Ian or servicing any one of our thousands of customers every day, I am ever grateful for the way that you all show up.
So thank you. Keep leading positively and safely out there, and stay focused on people, people, people, customer, customer, customer. With that, let's move on to highlights on Slide 3.
Conditions are strong and the business is performing very well. delivering another period of strong revenue and earnings growth in end markets, which I will characterize as ongoing high demand. And when combined with a clearer and more improved outlook, ongoing market dynamics supporting structural advancement and our position of financial strength, these conditions are as favorable for our business as I've ever witnessed.
In the half, group rental revenues increased 26%, while the U.S. improved 28% on top of strong growth a year ago. These revenue gains are the principal drivers of the course of PBT and EPS growth which was 28% and 32%, respectively. During the half, we continued to advance our Sunbelt 3.0 plan, doing so by executing on all our capital allocation priorities beginning with nearly $1.7 billion in CapEx, a notable increase in pace from Q1, which fueled our existing locations and greenfield additions with new rental fleet and delivery vehicles.
We expanded our North American footprint by 72 locations, 34 through greenfield openings and 38 via bolt-on acquisition; further invested $609 million in bolt-on acquisitions in the half; and returned $206 million to shareholders through buybacks. And we announced today our interim dividend of $0.15 per share which is a 20% increase on last year's interim. Despite these levels of growth, capital investment, acquisition and returns to shareholders, we remain near the bottom of our net debt-to-EBITDA leverage range at 1.6x.
These activities demonstrate our confidence in the ongoing health of our end markets and the fundamental strength in our cash-generating growth model. With this performance and outlook, we now expect full year results to be ahead of our previous expectations.
Let's move on to the outlook on Slide 4. Recognizing the performance and momentum in the business, we increased our full year rental revenue guidance versus last year as follows. We now anticipate the U.S. to be in the 20% to 23% growth range. Canada increases to growth of 22% to 25%, and the U.K. improves to a flat outlook. Gross CapEx is unchanged, maintaining a range of $3.3 billion to $3.6 billion, of which $2.7 billion to $3 billion will be in new rental fleet. Also unchanged is free cash flow of circa $300 million.
On that note, I'll hand it over to Michael, who will cover the financials in more detail. Michael?
Thanks, Brendan, and good morning. The group's results for the 6 months are shown on Slide 6. We had a strong quarter and hence, 6 months with good momentum across the business. This momentum drove strong growth in the U.S. and Canada, while U.K. rental revenue grew slightly despite all the Department of Health testing sites being demobilized in the first quarter. As a result, group rental revenue increased 26% on a constant currency basis. This growth was delivered with strong margins an, EBITDA margin of 47% and an operating profit margin of 29%. As a result, adjusted pretax profit increased 28% to $1.243 billion, and adjusted earnings per share were $2.12 for the 6 months.
Turning now to the businesses. Slide 7 shows the performance in the U.S. Rental and related revenue for the 6 months was 28% higher than last year at $3.8 billion. This has been driven by a combination of volume and rate improvement in what continues to be a favorable demand and supply environment. The strong activity and favorable rate environment have enabled us to pass through the inflation we've seen in our cost base, both in general as well as in the direct costs related to ancillary revenues such as fuel, transportation and the erection and dismantling, which are growing at a higher rate than pure rental. These ancillary revenues generate a lower margin than the pure rental business and represent a great proportion of revenue this year. In addition, we continue to open greenfields adding 31 in the period and complemented our footprint through bolt-on acquisitions, adding 32 locations in the U.S. Inherently, in the early phase of their development, greenfields and bolt-ons are lower margin than our more mature stores. As we discussed in Q1, these factors are a drag on drop-through, which we expect to improve as we move through the year and margins. This progression can be seen in the second quarter with drop-through of 49% contributing to drop-through of 46% for the 6 months and an EBITDA margin of 49%. This drove a 32% increase in operating profit to $1.283 billion at a 32% margin, while ROI was 27%.
Turning now to Canada on Slide 8. Rental and related revenue was 22% higher than a year ago at $341 million. The original Canadian business goes from strength to strength as it takes advantage of its increasing scale and breadth of product offering as we expand our specialty businesses and look to build out our clusters in that market. The level of bolt-on activity, particularly the [ McFarland ] and [ Flaga ] acquisitions, which have a higher proportion of lower margin sales revenue than our business has been a drag on margins. This impact will reduce in the future as we reduce the level of outside sales of these businesses. Our Lighting, Grip and Lens business continued to improve following some market disruption earlier this year, with the threat of strike action in the Vancouver market, which resulted in productions being delayed or transferred elsewhere, but again, it was a drag on margins. As a result, Canada delivered an EBITDA margin of 44% and generated an operating profit of $92 million at a 24% margin, while ROI is 19%. Turning now to Slide 9. U.K. rental and related revenue was 7% higher than a year ago at GBP 293 million. This growth is despite the significant reduction in work for the Department of Health as we completed the demobilization of the testing sites during the first quarter. As a result, the Department of Health accounts for only 8% of total revenue for the period compared with 32% a year ago. The core business continues to perform well with rental revenue 26% higher than a year ago. However, the inflationary environment, combined with the scale of the logistical challenge in completing the testing site demobilization over 3 months and the significant increase in demand over the summer, particularly in the returning events market, contributed to some operational inefficiencies which impacted margins adversely. The principal driver of the decrease in operating costs is the reduction in the work for the Department of Health, offset by the additional costs referred to earlier. These factors resulted in an EBITDA margin of 30% and operating profit margin of 13%. As a result, U.K. operating profit was GBP 48 million for the 6 months and ROI was 12%.
Slide 10 sets out the group's cash flows for the 6 months in the last 12 months. I will not dwell on this slide for long, but it does illustrate the significant change we've seen in the business over the last 10 years. Despite increased replacement expenditure and significant growth capital expenditure in the first half, this has all been funded from the cash flow of the business while still generating free cash flow of $154 million.
Slide 11 updates our debt and leverage position at the end of October. Our overall debt level increased in the 6 months as we allocated capital in accordance with our policy, spending $619 million on acquisitions and returning $293 million to shareholders through our final dividend for 2022 and $207 million through buybacks. As a result, leverage was 1.6x, excluding the impact of IFRS 16 towards the lower end of our target range. Our expectation continues to be that we will operate within our target leverage range of 1.5 to 2x net debt to EBITDA, but most likely in the lower half of that range as we continue to deploy capital in accordance with our capital allocation policy.
Turning now to Slide 12. One of the actionable components of Sunbelt 3.0 is dynamic capital allocation. An integral part of this is a strong balance sheet, which gives us a competitive advantage and positions us well as we take advantage of the structural growth opportunities available in our markets. In August, we accessed the debt markets in order to strengthen our balance sheet position further, and ensure we have appropriate financial flexibility to take advantage of these opportunities. We issued $750 million of 10-year investment-grade debt of 5.5%. Following the notes issue, our debt facilities are committed for an average of 6 years at a weighted average cost of 4%. And with that, I'll hand back to Brendan.
Thank you, Michael. We'll now move on to some operational and end market detail, beginning with Slide 14. Our strong U.S. growth continued through the second quarter, delivering half year growth of 22% in General Tool. Specialty continued its remarkable performance, growing 34% in the half on top of last year's 23% in the same period. The strength of this performance continues to be broad, extending through every single geographic region and specialty business line. Consistent with what I've been saying in conjunction with recent results, the current supply and demand equation is as favorable as we've ever experienced. This effect continues to contribute to market share gains and record levels of time utilization throughout the business. This ongoing reality, which is now sustained for several quarters, makes incredibly clear the step change and structural change we are witnessing, meaning, first, that rental penetration is deepening before our very eyes. And secondly, those benefiting from this increased rental penetration are indeed the larger, more experienced, more capable rental companies who can position themselves to be there for this increasing customer base and, therefore, realizing a larger share of what is, without question, a larger market. With the ongoing backdrop and demonstrably improved discipline within the rental industry, it is warranted and logical that we are increasing rental rates and certain other aspects of what we charge to provide our service. These trends continue as our sequential and year-on-year rate improvement remains very good, something we believe will carry forward as we enter next year.
Let's take a closer look at our specialty business performance on Slide 15. The year-on-year rental revenue movement illustrated herein demonstrates the ongoing and compounding growth across all specialty business lines. Total U.S. Specialty, as you see, rental revenues increased 34% in the half. As history has taught us, inflection points in the cycle create flash points or swift step changes in rental penetration. In this instance, 3 things are different than points previously, particularly when it comes to specialty and they are: one, there is now a reliable alternative to ownership in these specialty business lines; two, today's undeniable and ongoing market dynamics of supply constraints, inflation and labor scarcity; and three, these 3 dynamics have not been transient and therefore, we're not in an inflection point, rather, we are in an inflection period. Together, these form as enablers and tailwinds to structural change and have contributed to our great growth in specialty over the last few years and will continue to do so into the future.
Further, as you'll see, I'm pleased to announce the recent acquisition of Modu-Loc, Canada's leading temporary fencing provider. This creates our 11th specialty business line in North America, which we see not only as a great addition to our Canadian offering, but a platform to expand into the U.S. with this new specialty business line. Finally, this level of activity in our specialty business serves as a proxy for the strength of our nonconstruction end market, which generates a significant portion of our specialty revenues and is an important part of our general tool business as well.
As a reminder, let's move on to a nonconstruction overview on Slide 16. Our specialty and general tool businesses services a large and broad range of nonconstruction end markets. When we describe the vast scale and diverse landscape of this component of our end markets, it seems some struggle to understand the relationship between equipment rental and nonconstruction. However, I do think it's becoming clearer, so we're going to keep at it.
We commonly refer to an incredibly large component of this nonconstruction end market as MRO, which is the very maintenance, repair and operations of the geographic markets that we serve, such as facility maintenance, which we've covered before but worth saying again, clearly defined as a market in which hundreds of billions of dollars are spent annually running and maintaining facilities. As we have described before, from cleaning to painting to decorating to planting to temporarily powering to cooling to repairing and so on, of the many, many types of facilities that make up the 100 billion square feet of commercial space under roof in the U.S. alone. The rental of our broad range of specialty and general tool products will increase. As I pointed out when covering the specialty slide, this is very much a structural growth arena in the very early stages with a long runway for growth.
Now that we've touched on specialty and nonconstruction markets, let's turn to Slide 17 and detail the construction landscape. For a variety of reasons and more importantly, tangible evidence, the nonresidential and nonbuilding components of the construction end markets are proving to be incredibly strong in the present, and increasingly so in the forecast to characterize them as resilient, would, at this juncture, be an understatement. I'm going to spend a bit of time on this and the next 2 slides as I think it's worth a fuller understanding and appreciation.
Starting on the top left with the Dodge Construction Starts chart, you'll see at first glance the strength of recent starts and the forecasted growth through 2026. If you look a bit closer, beginning with the downturn in 2020, 2021, that's the first period highlighted with that dotted line you'll see on the slide. You'll recall that was a nonresidential slowdown as residential construction, to most everyone's surprise, turned out to be a boon during that period, and thus, was softening to the overall fall.
Same chart, now just a couple of years down the line, the second period highlighted. Notice the swift uptick in starts in the very recent period. This is not a residential uptick as experienced in 2021. Rather, this is the actual happening, not forecast, but actual of what we have been saying would happen. Specifically, it is the early wave of new project starts derived from a combination of private investment and legislative-led federal project funding and incentives.
Moving to the bottom left-hand chart, you'll see the Dodge Momentum Index is now at its highest ever level. To be clear, this measure indicates projects in planning, not projects that have started. So what should your takeaway from these charts be? One, a whole pile of new projects has just begun. And two, a supportive wave is in planning that more than validates in our view and Dodge's, these starts and put-in-place forecast.
So moving now to the top right. These figures in dollars are in put-in-place values. In other words, spreading the cost of the project over the duration as opposed to all-in-1 period as is the case with starts. As you look at these forecasts, for the heart of our construction end markets, specifically nonresidential and nonbuilding, the strength over the last several quarters and recent spike in starts I've just covered, translate into consistent growth and put-in-place for the next several years, as seen here, growing from roughly $900 billion in 2022, to nearly $1.2 trillion in '26. Many have commonly held the opinion that as goes residential, goes nonresidential. That is just not the case today. It is increasingly clear there is far less a correlation between residential and nonresidential construction in this era of megaprojects and larger-than-ever-before-seen federally-funded initiatives, both of which we'll come on to.
This backdrop should set up nicely the next couple of slides, beginning with 18. You'll recall in June, we introduced details surrounding what we internally refer to as mega projects, projects with a value of over $400 million ranging from data centers to health care to airports to liquid natural gas plants to electric vehicles, et cetera, et cetera. A key point we attempted to get across was the abundance of these projects and how much of the overall nonres and nonbuilding construction market starts they made up. As listed here, these projects have made up roughly 30% of recent years' construction starts values, a number much larger than, in fact, more than double what it was in the pre-GFC era. And look at the trends. There are currently 200 projects in this genre with an average project cost of $1.2 billion that are ongoing. In planning and prebid phases, there are 300 with an average value of $1.9 million (sic) [ $1.9 billion ] with estimated start dates by December of 2023. Projects of this scale and sophistication are ideal for residents, on-site solutions, meaning we often have dedicated storage and working space on the actual project's site housing a very large and broad offering of our products and associated services. These services ranging from on-site maintenance repair technicians, telematics-equipped product, producing efficiency gaining benefits to our on-site and remote teams and, of course, to our customers, providing benefits such as reduced carbon emissions and, of course, our mantra of availability, reliability needs, all of which are essential for the success of these mega projects.
Solutions like I've just outlined, require a rental company with the scale, experience, technology, expertise, breadth of product and, of course, financial capacity. I hope you understand this is a material contributor to structural change in our industry, which we are a certain benefactor of.
Turning now to Slide 19. Organized here are 3 major legislative acts that are just beginning to drive increased demand in overall market you have, by now, realized is already very active. Beginning with perhaps the act that has been covered and understood the most, specifically the Infrastructure Investment and Jobs Act. The headline figure of $1.2 trillion may be best understood by compartmentalizing $650 billion as a renewing of sort of ordinary run rate federal investments in roads, bridges, rail, utility, et cetera. The key to this act is not only reassuring the baseline investment, but its delivery of an incremental $550 billion in new project spending throughout the U.S.
With over 10,000 programs and projects identified ranging from $100,000 in project cost to $3 billion thus far. Despite the fact that this act was actually signed in the law back in November of 2021, very little has yet to translate into actual project starts. However, this is now beginning and will go into full effect with starts largely commencing between 2023 and 2025. You'll notice that $129 billion of the incremental $550 billion has been allocated from the federal government to state through October, which will begin seeing actual shovels in the ground, so to speak, in early 2023. So this is just less than 25% of the overall incremental funds to be allocated indicating the substantial and long tail inherent in federal infrastructure funding like what we see here.
Next is the CHIPS and Science Act. A bipartisan bill swiftly passed through Congress and signed into law by the President in just August of this year, putting in motion a revitalization of domestic semiconductor manufacturing, whereas for decades, the U.S. actually experienced a decline from 40% of the world's semiconductor production to less than 20%. The overall act will invest $250 billion to progress American semiconductor research, development and manufacturing. The act is designed to support directly or through tax credits, nearly $140 billion in new semiconductor manufacturing projects. A number of projects have already begun even before passage of the act, indicating what one could comfortably conclude as the beginning of a new era of mega projects coming to fruition.
As you will see in some of the detail on the slide, these are more than a step above the run-of-the-mill mega project. Individual semiconductor buildings are underway with more already announced to begin in 2023, with price tags as large as $10 billion per project. As you can imagine, these projects will take 3-plus years to complete. They will consume an enormous amount of rental fleet and require very much of what I described earlier in terms of rental company capabilities. We'll be talking about semiconductors for years to come, similar, if you will, to the way that we've been talking about data centers for well over a decade now.
And finally, the Inflation Reduction Act, also signed into law just this August. $370 billion of this bill will fund directly or by way of tax credits, a broad basket of energy production and manufacturing, ranging from solar field construction, which will triple the current U.S. capacity by 2030, to battery factories to wind farms, to EV production and so on.
So what we have here is a trifecta of government investment, equaling nearly $2 trillion in investment that will indeed create thousands and thousands of projects, which Sunbelt is poised to take great advantage of.
Let's now turn to our business units. Outside of the U.S., we'll begin with Sunbelt Canada on Slide 20. Our business in Canada continues to expand and perform well as our brand increases and customers recognize the growing breadth of products and services offered. The growth is coming from existing general tool and specialty businesses, complemented by well-paced additions of greenfield openings and bolt-on acquisitions. Consistent with our last update, the conditions are not dissimilar to the U.S. in terms of activity, demand and the supply environment, and thus, we are experiencing equally strong performance from a utilization and rate standpoint. We are well underway executing on our Sunbelt 3.0 plans in Canada, and our runway for growth remains long.
Turning to Sunbelt U.K. on Slide 21. I'm pleased to be in a position to report our U.K. business has now fully made up for the lost rental revenue associated with the Department of Health testing site that was a substantial part of our revenues throughout last year. This is no small accomplishment, signaling a combination of market share gains and a reassuring level of end market activity, particularly in infrastructure and industrial projects as well as increasing progress in areas us, such as facility maintenance being brought about by our unique cross-selling capabilities across our unmatched product and services portfolio. Live events have been an ongoing contributor in this post-pandemic period, which, of course, was virtually 0 through 2020 and '21. The team was incredibly proud to provide our products and services surrounding the Queen's funeral, something that I'm sure those involved will remember for years to come.
A consistent area of focus to improve our U.K. business has been on advancing rental rate and the associated fees we charge to provide service to our customers. Although progress has been made, the focus in this area has been significantly heightened in recent weeks as we work to rightfully increase rates in a more meaningful manner, late this calendar year and into 2023. This is something the U.K. rental industry seriously falls behind in, and our position will be steadfast in making a demonstrable change in the face of notable inflation our business and indeed, our industry has absorbed. This is not the last that you'll hear about our rate focus, and I look forward to reporting further a material success in the periods to come.
Turning now to Slide 22. With October's conclusion came the halfway point in our 3-year strategic growth plan, Sunbelt 3.0. And as we've done with every set of results since the launch, I'm pleased to give you a midpoint glance on our progress. For time's sake, I'll cover just a couple and what more tangible than our expansion. In just 6 quarters, we've added to the footprint of our business 195 locations in North America, 122 by way of greenfield openings complemented by 73 locations from the bolt-on acquisitions. This combines for a nice mix of specialty and general tool locations further advancing our clustered market progress. We actually achieved cluster status in an additional 13 of the top 100 U.S. markets, giving us 44 of our full 3.0 program target of 49. This is great progress, particularly when you look to years down the road, as these new locations to the Sunbelt Rentals platform mature into larger contributors in terms of revenue and profits, and importantly, create more outlets to deliver the service to our customers Sunbelt is so well known for.
Also worthy of a call out is the inaugural issuing of our annual stand-alone sustainability report that we put out earlier this month. One can summarize by saying we are well ahead of our planned Sunbelt 3.0 pace.
Turning now to Slide 23. As demonstrated in the results today, our business has enjoyed a successful period of growth and execution against our plan. This has been accomplished despite a number of uniquely challenging dynamics happening simultaneously in the markets we all operate. We first introduced this slide in our Q3 results last year in an attempt to highlight the primary macroeconomic concerns and more specifically, our view on duration and the effects on our business. Understanding the dynamics of supply constraint, inflation skilled trade scarcity as it relates to our end markets and our business is really important. This version is specifically updated today with our views on anticipated duration. Taking this in, we now know that these 3 monumental factors proved to be not transitory.
Although we do join the increasingly popular opinion that inflation should moderate in the quarters to come, at the very least, given the lapping comparators, our view on supply constraints and skilled trade scarcity is far more of the same. We believe as it relates to our industry, we have several quarters ahead of tough access to supply of new rental assets and the associated parts for many in our industry. It's also vitally important that we believe this constraint to be a material preventive factor of our industry over fleeting. Lastly, we're seeing no signs of excess availability in the precious commodity of skilled trade workers. The important thing in understanding the tailwind effect these have had in the recent past will have in the near term, and we believe amounting to a real advancing step in structural change, one that will be in the near and long term favorably impact the larger, more capable companies in our industry. We'll update you on any change in views, particularly in terms of duration in the quarters to come.
Moving now to our fleet plans on Slide 24. Our CapEx guidance is unchanged from our Q1 update. As I've just covered, the supply constrained environment is still present. However, we are working well with our primary equipment manufacturers and the landing throughout the half have been strong, picking up pace through the second quarter and into November. So with the component parts unchanged, we guide to $3.3 billion to $3.6 billion for the group in the full year.
Let's conclude on Slide 25. It has been a very good half year of growth and ongoing momentum. It's been a period that has added a significant amount of clarity to the strength our end markets are very likely to yield in 2023, 2024 and beyond. Some of this clarity came in the form of the recent passing of the CHIPS and Science and Inflation Reduction Acts, adding to what was already a plentiful level of end market activity, flush with day-to-day MRO, small to midsize projects and the very present and growing mega project landscape.
The trifecta of market dynamics, being supply constraints, inflation and skilled trade scarcity remain very real. The ongoing presence of these come with operational challenges, however, are outweighed by the secular benefits to our business, resulting in the increased pace of rental penetration and considerable market share gain for businesses in our industry who, again, possess the scale, experience, equipment purchasing influence and financial strength. Rest assured that our business is positioned to win in this reality.
This update should demonstrate, once again, the strength of our financial performance and the execution of Sunbelt 3.0 well ahead of our planned pace. So for these reasons and coming from a position of ongoing strength, improved trading and positive outlook, we look to the future with confidence in executing our well-known and understood strategic growth plan, which will strengthen our business for the years to come.
And with that, we'll turn it over to the moderator for Q&A.
[Operator Instructions] Our first question today comes from Rahul Chopra of HSBC.
I have a couple of questions. In terms of one of the mega project and in terms of structural shift we are seeing in the industry, just wanted to understand just given the mega hit what we're seeing, what's really driving the M&A pipeline from the seller's point of view? That's the first question in terms of what's really driving that. And the second, in terms of the mix fleet. I noticed that there is a decrease of mixed fleet basically from 40 months to 38 months. And given the supply constraints, just what is driving the mix fleet? Is it because of just if you can give some sense of the older fleet versus new fleet in terms of age dynamics?
And the final question is in terms of the free cash flow guidance. I noticed that the CapEx guidance is unchanged. And given the increase in revenue growth, maybe just what's driving the free cash flow guidance unchanged?
Sure. Rahul, I think I understood your first question, but if I'm slightly off, just let me know. But my -- I think I understood it as what's the driving factor between Sunbelt rentals being the benefactor of winning those projects? I understood it less to be what's driving the very presence. If it was the latter, the driving the very presence of it is the things we've been talking about, things, when it comes to this trend of onshoring or reshoring when it comes to U.S. manufacturing, the advent of things like electric vehicles, batteries, the increased importance around liquid natural gas just big, big funding to big projects further now complemented by the Infrastructure Act, the CHIPS Act and the Inflation Reduction. So I'll cover that just in case.
What's driving the very selling, if you will, of the -- of Sunbelt Rentals winning our sort of unfair share of these projects is just simply what it takes to do it. Not least of which is just the fleet. And obviously, you see the CapEx guidance that we've given. Getting this level of fleet in this constrained market is no easy task. And simply what we're seeing is we are seeing winners and we are seeing losers. And ourselves and a couple of others out there are the real winners in that. We're just simply occupying a larger ration of what manufacturers can produce.
And then the other bits and pieces are, of course, besides just availability, it's the experience. We have teams that are seasoned and experienced operating and delivering on-site capabilities on these mega projects. It's the things that you have to have that are table stakes in that environment. Telematics, reporting when it comes to telematics, and that broad, broad range of fleets. So I hope I've answered that one, but I'll allow you to come back if you need.
In terms of fleet mix, you kind of answered it in your question. It's a combination of these increased landings at pace that we've recognized, but also disposals of some of our oldest fleet that's out there, and I'll yield to Michael here for free cash flow.
Yes. On the free cash flow, what we are seeing is a slight increase in working capital. And the easiest way to characterize that is some of our debtors or the receivables are paying a little bit more slowly. That's a little bit more slowly than last year. And the last 2 years have been somewhat exceptional in that our receivables book was as clean and as young as it's ever been which is [ perverse ] given it's a COVID time. But that's the way to that. So absent the last 2 years, I'll be sitting here and saying, our receivables are consistent with us or as good as they've ever been. They're not -- that's not quite true. So what we're seeing is a slight uptick in working capital from last year, which sort of mitigates the improvement that you're seeing from the performance of the business.
I guess the other thing just to bear in mind with free cash flow is, yes, it's around about $300 million. But we are, at the moment, landing the best part of $300 million of rental fleet per month. So that's only got to arrive a little bit early or a little bit late, and that number can be somewhat different from $300 million, $100 million, $200 million difference. So there are a lot of moving parts, but the main one is just a slight increase in working capital, but nothing that we wouldn't have -- that we haven't experienced before.
We move on to our next questioner, which is Annelies Vermeulen of Morgan Stanley.
I just have a couple as well. So firstly, just coming back on these mega projects, you've been very clear about how the larger players like Sunbelt will continue to take share versus the smaller players. But I'm just wondering, given some of the size of these projects and you mentioned some of these are taking up to 3 years, how confident are you that rental will be the preferred option given the size of it? And if it's a 3-year project, there's more -- perhaps more of an argument to own the equipment? Or is it a case of those supply chain constraints will continue? And actually, even if you want to own it, you can't get hold of it. I'd love to get your thoughts on that.
And then secondly, on -- as you said, you've added close to 200 locations 18 months into our 3-year plan. So should we infer that you'll add fewer next year? Or is it more likely that you'll come in ahead of target or ahead of schedule with regards to adding those locations?
And then lastly, you've mentioned an 11th specialty vertical in fencing. In the past, you've very helpfully given color on rental penetration and potential market share for some of your specialty verticals. So I'd love to hear a bit more about how big that market is, what the penetration is like, and what the scope is to consolidate.
Thank you, Annelies. Let me take a stab at those. The -- first of all, to be clear on the mega projects. It's not really some that can take up to 3 years. Most are going to take 3-plus years in terms of the construction. It's a really good point you make, and it's what I would use to add clarity to the step change in rental penetration. I mean, fact of the matter is, given the quantum of fleet that will be requisite in the construction of these sites, what we're seeing through very, very recent and active dialogue with customers is their propensity is to go even further rental.
And one of the reasons will be just the sheer quantum of capital that they would even be far less experienced or exercised in dealing with. And secondly, if you actually look at dealer stock levels, whether that be your traditional yellow iron or types like ground engaging trenchers, that sort of thing, pile drivers, light towers that if you were an owner, you would be going through the dealer distributor route, dealer distributor stock levels are at their lowest point in history, literally lower than what they were in 2009 when it was rather intentional.
So this supply constraint -- I think, one of the very important points we made during the call, and this picks up on your question here, the very supply constraints is actually a governing or limiting factor or preventive factor from our industry over-fleeting, which is very important and I don't think many get. They look at the CapEx levels of ours and say, our top 2 publicly listed peers, and they worry the industry's over-fleeting. It's quite the opposite.
If you actually look at manufacturer production detail, manufacturers are still, in most cases, when it comes to servicing our industry, like if you take, for instance, aerial work platform and telehandlers, which makes up 40% to 50% of the original equipment cost of many of the fleets that are out there in the rental industry, we know that 2018 was their peak production in terms of manufacturing and delivery into North America. So for scissor lifts, booms or man lifts as they're called and telehandlers, we're still producing significantly below. So 2019, it fell off, which was then the intention of the rental companies at the time. In 2020, it fell off of a cliff. 2021, it kind of halfway recovered. 2022 is still below the peak of 2018.
So what the production levels today is only just about enough to satisfy replacement from 7, 8 years ago. So I know that's kind of not directly answering that part anyway is additive to your question, but there will be more rental for those reasons and not ownership on these mega projects.
Your point about yet, we've done nearly 200 locations, you'll remember our full 3-year plan for greenfields was 298. We said it would be augmented and added to by way of bolt-on or acquisitions, no. Our full year greenfield ad this year is going to be about 90 locations, and we will be in the 100-or-so range for next year. So we're going to satisfy both that whole greenfield program, but a bit more than that, given the activity which has been great in that -- in the bolt-on domain.
And in terms of the 11th specialty, the temporary fencing, I promise you this. When we get to rolling out our next plan and we give that great update, which would have been Slide 44 in our capital market deck, that would have given all the nitty-gritty detail each of those specialties, we'll revisit that then.
But I can tell you this about temporary fencing. Here, you've got this great business in Canada with kind of just less than 20 locations. We've identified already 100 locations that we would target geographies in the U.S. This is a few hundred million rental revenue business for us in the not-too-distant future. So it's not something that we would do that's going to be this little tiny specialty. It's a really nice business that also has great features from a cross-selling standpoint. I hope that answered your questions, Annelies.
And next, we have Arnaud Lehmann of Bank of America.
A couple on my side, and I guess related to Slide 23, which I will follow up on Annelies' question. Firstly, on the supply of new equipment, steel prices have come down a lot. So I'm assuming this eventually should be reflected in the pricing of some of this new equipment or what you buy for replacement. How should we think about that? Could that have any influence on your CapEx spending going forward?
And secondly, when I look at this Slide 23, if everything comes to fruition as you think it will, it should drive some meaningful wage inflation, right? So if demand is good, there's still inflation in the system, there's not enough people on the ground. How do you -- what sort of wage inflation are you seeing coming for later in the year?
Great. Thanks, Arnaud. The first one, I should bring you along with myself and some of our colleagues, Brad Coverdale, most specifically, who is in those negotiations with our OEMs. Look, you're right about steel. I would not all of a sudden as well as some of the other commodity pricing, I would not all of a sudden wave the flag and say that our purchasing prices will be going down. What I think you will see or what we are seeing is some of the surcharges that would have been out there go away.
The OEMs largely have gone through a period of kind of rebasing what they charge for producing their products, just as we've gone through a period of rebasing what we charge for rental and the associated services. And certainly, the key to understand for us, I mean it -- so much of it comes down to dollar utilization. If things cost a bit more and our dollar utilization is at parity or better, that's a great capital allocation channel, which we will continue to pursue. However, when you think about what this is going in the future, I do think we've taken the most meaningful pieces of the inflation of our rental assets, and that will begin to wane a bit.
But the key, key thing is this. We, obviously, with our spending size, we get the best pricing that's available in the marketplace. And that delta between ourselves and others has not changed. And what's really important when it comes to our ability to bring products to our customers at great overall value is making sure that our delta has the advantage, and that has not changed at all.
When it comes to wage inflation, look, I mean it's obvious. We're in an inflationary environment, particularly when it comes to skilled trade. We've made and we've telegraphed and we have shared very well the steps we've made back in October of '20, then June of 2021 and then May of the current year. Given the fact that this is a call that I began by thanking our team about, I'm not going to get into details of what we would expect wage inflation to be specifically next year. We'll address that early in the new year in conjunction with our Q3 results. But yes, this is an environment where we would see wages ticking up. Time will tell as to whether we made the turn in the size of the step change. I hope that's covered both your points or questions.
[Technical Difficulties]
Operator? Brendan, if you'd like to give any further remarks and we give her a moment to just rejoin and allow the remaining people to ask a question, that would be brilliant, thank you.
Well, we can see here with Will that there are some questions in the queue. Correct, Will?
I can, yes.
Why don't we just give -- we'll give it 1 minute here, if everyone can hang on. And if we can't get the operator back momentarily, I suppose everyone that's in queue for a question knows how to reach us.
If anyone who's waiting in the queue to ask a question, if they want to e-mail me the question, I can then read them out and Brendan can answer them.
Yes. Sorry, it's Will here. I've got a question from James Rose at Barclays. It's remind us the percentage project spend that goes into rental. Is it the same for mega projects?
Second question, is there a specialty cross-sell into mega projects seeing this is -- are you seeing this in customer requests? And the mega project margin profile, are these consistent with 50% drop-through rates?
I'll begin with the last. Yes, especially when you're on site, you get big benefits of scale there. One thing we commonly refer to as deliver once, use many. And if you think about some of those ancillary charges having smaller margins, you make up that benefit. So these are very profitable projects.
Percentage of flow through, if you will, in rental dollars in the projects, it's a wide range. And generally speaking, we would use kind of that 5% for your smaller commercial construction and down to as little as kind of 1.5% or so for a mega, mega project. By this, I mean sort of a project like one of these semiconductors you might be in that 1.5% in or so range. So it really just depends on the project. A data center is going to be more in the middle of those 2 points. So unfortunately, there's no just specific all-encompassing answer, but that's kind of what you have.
But to put it in perspective, if you think about fleet required for one of these semiconductors, you're talking about $100 million in rental fleet, and that's going to be general tool, as well as to move into your second question, specialty. So yes, you're going to see quite a bit of ask for specialty, whether it be the latest specialty we've just added of perimeter fencing and temporary fencing, or it be load banking is going to be significant in virtually all of these -- power generation, of course, but so much so more so these days is taking diesel power and augmenting that with battery storage. So yes, very powerful cross-selling attributes with mega projects with specialty.
And then the question on margins?
Yes, I answered that one a couple moments ago.
So this is from a Dominic Edridge at Deutsche Bank. What percentage market growth with CHIPS, IRA add to rental market growth? Does the 3% industry forecast include this? Second question, is there a fundamental difference in the fleet used or just amount of fleet used in infrastructure projects versus, say, other projects?
And third question on U.K. rate improvement. Does this require a rebasing of rates or just yield management? Are you seeing support for rate increases in the market in spite of a softer U.K. market?
Yes. So in terms of the industry forecast, that one, and you're referring to, of course, Slide 17 there where we show the IHS Global Insight, and they are -- they tend to be a bit behind, and they tend to focus more on the closer years than the further years. I would say the answer is there is a small amount of CHIPS and Science and Inflation Reduction that has been entered into those figures. I would fully expect those to go up. And I will remind you that our cadence has been in the 2.5x or so of what the industry ends up being in any given year. So if you're 2.5 to 3x the outer years of 3, there are worse outcomes, but that's just the beginning, and they will move forward, I'm sure.
Fundamental difference in fleet when it comes to infrastructure, no, not really. Much, much of it is very core. So whether it be light towers, of course, they're going to migrate from diesel light towers to solar or hybrid light towers, you're going to have much of the ordinary ground-engaging skid loaders, mini-excavators, trench compactors. There will be a notable step change in some of the larger ground engaging 45,000-pound class and above excavators. I'm probably getting too detailed here, which is something that we've been adding, but it's not something that we don't know. We're quite good at it actually when it comes to some of the infrastructure projects we're working in today and some of the mega projects that we're that working in today. So very, very much in our wheelhouse.
When it comes to the U.K., this is not yield management. This is rebasing. I mean I don't know any better way to explain it, but the U.K. industry when it comes to rental, has just been sort of this incestuous environment of everyone chasing everyone to the bottom. And we are, plain and simply, making that change. We've had very good dialogue with customers thus far. They fully understand it.
I mean if you think about our customers in the infrastructure or commercial side of the business or construction side of the business, every single other supplier has increased what they charge to supply than what they charge and here rental is just lagging behind. It takes leaders in the industry, number one, but number two or tied at number one, if you will, it takes a product portfolio and a level of service that warrants your increase.
And our team between Andy Wright, Phil Parker, the MDs, Dave Harris, our strategic sellers who are with these customers day in and day out, what they've done is built a much better business over the last few years, and we are now poised. We're in a position to actually charge what we should. And again, I think you will see results like what we've seen in the U.S. in the next 12 months.
I'm hoping that we've got an operator back on the line now.
Yes. The next question comes from the line of Allen Wells from Jefferies.
Just a couple from me. I'd love to dig back into the mega projects again. 2 parts there. One, sort of visibility do you actually have on work, contracted for 2023. Is it a bit earlier? Or are these big projects looking to locked in quite early?
And then on a typical large project, particularly ones I guess, maybe a broken ground already, what sort of market share does that should have on rental equipment? Is it in line or maybe slightly higher than, I guess, the 12% share you have in the broader market?
And then just moving on, on the drop-through. I think you talked obviously about improvements through the year. Full year target, I think, was around kind of 50-ish percent. You did a decent number in 2Q. Are you expecting a further decent step-up in the second half?
And then my very final question, just on interest cost guidance, which looks like it's obviously creeping up a little bit. What are the assumptions you've got behind the interest cost line for the full year now around that second half number?
Yes. Thanks, Allen. I'll take the first, and Michael will take those last 2. Visibility is remarkably clear. When you look at projects that have all the intention ambition and really the mandate from the payer here, whether that be a semiconductor company itself or liquid natural gas company that has brought on these contractors to do it, they have expectations when it comes to starts. The difference is today, in a way, as a rental industry, we've spoiled customers.
In the past, if you had a project that was beginning in March and you engage with the likes of us or one of our peers for a larger -- a rather large order of, let's just say, $10 million, $20 million, $30 million in original equipment cost, we spoiled you because we could come through with that. Today, it's a bit different. Maybe not so much on the $10 million, $15 million sort of genre. But when you get into $50 million, $75 million plus, $100 million, it's very different. These customers and the suppliers like ourselves have to engage very early because really what you're doing is, yes, of course, you work down the line and you begin with replacement needs and then you have anticipated growth levels. And we, in turn, work with our OEMs for increased deliveries. In essence, as I said today, it's increased rations.
So the customers now know better than ever before. They need to work with who their supplier of choice would be or suppliers, in some cases, of choice will be. And they realize that they have to be working several quarters out.
I mean just as a for instance, a week before Thanksgiving, I was in 2 cities in sort of 24 hours meeting with 2 customers. Two customers alone have a need of about $1 billion in rental fleet. Not too terribly many SKUs. These are the key SKUs, things like telehandlers, light towers, skid loaders, generators, that sort of thing, $1 billion worth of need, and these would be suppliers in kind of the alternative energy space and actually semiconductor and liquid natural gas base. So it gives you the ideas to the quantums that we're talking about.
And in terms of average project share on these mega projects, in many cases, like data centers have been in the past, you may have a pure lion's share, like you may have 70%, 80% share with the rest going to a few others here and there. But when it comes to your typical, if you will, run of the mill, couple of hundred million project, it's going to be more -- it's going to be a bit more than the overall market share, but not extraordinarily more so because those tend to be less the kind of on-site provider. So I hope that helps on the first, and Michael will take the next two.
Yes. On drop-through, as we've said, we expect it to improve as you -- as we went through the year. And so we would expect to have good drop-through in Q3 and Q4 with a view that we'll be aiming towards that 50% for the whole year. I wouldn't expect -- assuming the step change we have from Q1 to Q2, I wouldn't be expecting to have the same step change Q3 and then through Q4, but we expect to see a degree of improvement. There will always be a degree of lumpiness in it, but we'd expect it to continue to progress.
From an interest rate perspective, obviously, most of our debt's in dollars. So we're expecting rates there to move towards sort of by the end of our financial year. We're at sort of more in the sort of upper 4s, 5% area for that variable interest rate, which, compared with last time around in Q1, we thought it was going to be, all the players would have said it was closer to 4%.
Our next question comes from Karl Green of RBC.
Just a couple devil's advocate questions from me, please. I mean a lot of talk here on supply environment on the mega project side. Just looking at how potentially reliable some of the Dodge data is. I mean we've obviously had a pretty weak print from the ABI in October. So how would you guys reconcile that with particularly the DMI print, which is still pointing to all-time highs? And then the second question, again, just sort of squaring the circle around a very optimistic residential put-in-place forecast from Dodge. How that squares with the latest National Association of House Builder data points, which particularly for the West Coast have pointed to some pretty significant year-on-year price declines. Again, just how should investors be thinking about those very mixed signals that we're getting on the demand side of the equation?
Yes. Thanks, Karl. I'm actually glad you asked both of those questions. So one, let's go to Slide 17, and let's put in -- let's break up -- let's take it into 2 pieces here, forecast and actual. So if you look at the top left of Slide 17, that second circle indicating the kind of now time of the solid line. Remember, the solid line is no longer speculation, no longer forecast. Those have begun. And when projects like this begin, there are always black swan events out there, but they finish. And 99% of the time, the big, big projects which began, finish. And certainly, when we've talked about the funding apparatus that we've gone through, i.e., legislative activities, et cetera. So that is indeed finished.
When you look to the top right here, remember, that figure, you'll see there footnoted, and I know this is getting quite granular, that would be the update from September for Dodge. Wouldn't you know it, sometime around tomorrow or later this week, we will get the updated translation from the starts on the top left to put in place on the top right, where we will then update them. So it's just in terms of our timing, they haven't come fully through.
You ask a great question about ABI. And I think ABI is not surprising at all. When you think about the amount that has cleared the deck, so when you think about the amount that has gone from being in that indexing of planning and preparation in terms of literally what architects are going through and that which has come through. Furthermore when you look at the momentum, those projects are already in the, in some cases, bidding phases and those -- it's sort of post preplanning but still planning. So a lot of that architecture work is complete for those projects. So it's not surprising to me at all.
I would sit here on this call and say Dodge Momentum Index is soon to start going down a bit, which is what traditionally happens. When you go from in planning to start, you see that translate from one going up and one going down. What's unique about this printing is both the starts went up and the momentum went up, which means we're about to see even more starts. All of that, I think, validates that point on the top right of what ultimately comes through.
Your point on residential is a very important one because as I just said, the residential figures that you see on the top right of Slide 17. So for instance, in 2022, the $836 billion, that's still from the September figures. If you go to appendix Slide 30, this is an important one, here's what the update will have. So this, as you'll see on Slide 30, is represented in units. So I'll remind everyone from sort of single housing, and as I would have said in my script, let's face it. With the capital markets we're concerned with when it comes to Ashtead, primarily was this. Residential construction is going to slow, therefore so will nonresidential. Why do they feel that way? Well, that's kind of been the tale of the tape since World War II. That's why. But what we're seeing is that's not happening this time.
Furthermore, if you just look at what happened. So I would draw your attention kind of the right 1/3 of those lines in this bar chart and look at 2021. We peaked in the U.S. at base 1,084,000 single family, the green component of that bar, 1.1 million in essence, then single-family home starts. That fell in 2022 this year as interest rates climb. And what's happened here is the forecast. That forecast for '23, which is now 891,000 that number was actually about 1.2 million. So that's how much we've seen that forecast come down. Now when I bet the ranch on whether or not 891,000 is right, I'd say it probably would be -- I'd be pleased if it was 891,000 but maybe it's something more like 825,000, 800,000. But the point is in that look at prepandemic. Basically, what we're saying is single-family housing construction is going to be about what it was in 2018, 2019, pre-pandemic levels. If you remember, we were quite busy in 2018 and 2019. So what we're seeing is because of the very fact period, fact that the U.S. doesn't have enough homes there's still single-family home production. And sometimes it's better to be lucky than good. Look at multifamily because of this, multifamily is going to actually grow into the forecast. But either way, it's understanding those dynamics. I think people are expecting far worse. This, I think, is much more what it's going to be like. So Karl, does that answer those questions?
Super helpful. Yes very much.
We now move on to Neil Tyler of Redburn.
Two left from me, please. I wanted to circle back, Brendan, to your point on visibility and the tightness of supply and demand and length of projects. I wonder if you've been able to more broadly alter terms of trade, i.e., extending contractual terms, not just on the mega projects, but elsewhere, given the unprecedented supply/demand balance that you've seen. So is -- are the industry turns to trade-altering in any degree?
And then secondly, when you think about the cross-selling on the businesses that you've bought, are you able to quantify in any way or help us understand how you measure the sort of cross-selling sort of contribution to organic growth in acquired units?
Yes. Let me start with the second one. And the short answer would be, yes, we could quantify, not so much on this call. That's a good kind of capital markets point to take. But as our colleague who you would have met by way of virtually anyway during our last Capital Markets Day, Kurt Kenkel, often points out. The common denominator to the businesses that we buy, with our approach of bolt-on, I mean just look at the bolt-ons that we've done through October with $610 million or so. I mean, that's an average of $25 million of bolt-on. These are not humongous deals. Instead, these are nice little businesses, and we like what they do, and we like precisely where they are. It's our kind of ingredient.
But the reason why I say this is Kurt always reminds all of us, the common denominator in these businesses is they lack the capital to grow the way that they otherwise would be able to. So what we do when we come in, besides having it integrated in almost every case on the day we close from a system standpoint, is that we invest further to give their customers which they've had a broader range of products. And that just happens. And therein lies the cross-selling opportunities, if you will, or realities that come following those bolt-ons. So I hope you'll accept that as an answer to your second question there.
When it comes to visibility, the tightness, et cetera, and how that relates to contractual terms, I mean, keep in mind, there's only some portion of our business that is on terms other than just what's on the back of a rental agreement. And it's going to be basically kind of 1/3 of our overall business that are these strategic customers that have something more than a pricing in a market for 30 days or something like that. So in these contractual terms, you have a whole host of things, but most importantly, you change over time as you get bigger and bigger and more important to the delivery of their project. The very spirit of engaging in negotiations, you're just taken more seriously. Therefore, the red lines you may have in your contract are more noted and easier to get what you're looking for, all looking for a win-win with our customers. But things come to mind, like Michael talked earlier about our receivables in the time. So we get more significant when it comes to the actual agreement in terms of what those contractual terms are, and then the obvious things such as rental rates.
But another big one in that one would be I keep saying what we charge for the other services such as delivery. And of course, one of the things we've highlighted on these calls is delivery cost recovery. And if you think about just the progress we're making on that, if we just look at it from a year-to-date standpoint, we're actually at 90% delivery cost recovery through October. You'll remember, we would have said that was our goal, not even our budget, as we turn the year. And that's at 90% for the year versus 79% a year ago. And actually, October itself was 94%. So all of these things are coming through in some of these agreements, if you will, given the unique circumstance that we find ourselves in from a visibility and supply chain standpoint.
And it's not so much from a change in terms of trade, but what you do find is people are hanging on to fleet for longer in the current constrained environment, whereby if they were going to return it and rerent it a week or 2's time, they actually hang on to it because they want to make sure they've got access to it.
Yes. And there could be some also -- that is true. But furthermore, it's less top-up. And it's a top-up fleet that is easier sent back and sort of exchanged, et cetera. But it just shows this dynamic change that we're going through, as I said, under our very own eyes of structural advancements. So I hope that answers your questions, Neil.
Yes, that's very helpful.
And our last question today comes from Steve Woolf of Numis Securities.
Just one left for me as well. In terms of the CapEx guidance being unchanged into obviously, a very, very strong market, is that really a question just of the timing of the supply chain being able to land in the second half of the year? It doesn't seem like the bolt-ons have been [ particularly ] about buying the fleet itself rather than just the locations and the synergies and the investment that's able to go into them. So just any thoughts around that? And then secondly, on the M&A itself, how has the market been facing multiples at this point into an improving environment where supply chains are in short supply of kit, so to speak?
Yes. Thanks, Steve. First of all, from a CapEx standpoint, we wanted -- look, our plan is what our plan is in terms of that 3.3 to 3.6 that we've seen. Frankly, if we were able to say today that we could land an extra few hundred million in kind of February, March, April, then indeed, we would say that. But our focus today we really wanted to get across was, this increased clarity in what our end markets are going to be in 2023 and 2024 incredibly clearly.
As we usually do, we'll give our first look at CapEx guidance in March. I wouldn't be shocked if we do find from our primary OEM suppliers that some of our next fiscal year Q1 year might be available. We might land some of that a bit earlier in, say, March, April. So I'd be understanding of that. But it's not easy to get extra rations these days as I've been saying.
M&A, I would just say more of the same. Nice, nice pipeline, great little businesses. To your point, we're not buying businesses just to get rental fleet. We're buying businesses because we like who they are, what they are, where they are, in the main. There have been 1 or 2 bolt-ons where I do think some of the view on the deal was, hey, we pick up some fleet in some high utilized categories. But in the main, these are businesses that I've said before, we have to put that much more CapEx into which we look forward to.
And if there are no further questions, I would now like to hand the call back over to you, Mr. Horgan, for any additional or closing remarks.
Great. Well, thanks for joining the call today. Apologies about that a little bit of a delay. I guess, whenever you've got any sort of technology, even telephone involved, that can happen. But I appreciate your time, and we look forward to speaking in our next update come Q3. Thank you.
Thank you. That concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.