EssilorLuxottica: Sight To Behold - [Business Breakdowns, EP.210]

We will analyze the strategic rationale behind the merger, assessing how it shaped the company's competitive advantages. We will discuss the economics of prescription lenses, high-fashion sunglasses, and iconic brands like Ray-Ben and Oakley. Furthermore, we'll discuss the impact of emerging technologies like smart glasses, the Ray Band Metaglasses, and evolving consumer preferences on the eyewear market, as well as the competitive impact of upstarts like Warby Parker.

To break down SLR Pixotica, I am joined by Swetha Ramachandran, who manages the Artemis Leading Consumer Brand Strategy and is co-manager of the Global Select and Global Focus Strategies. We hope you enjoy this conversation.

This Esselor Luxotica, but the merger of those two companies, in fact, is not made up of individual brands. There is no brand called Esselor, there's no brand called Luxotica. The individual brands, however, such as Rayban, Oakley, and now Supreme that they bought just last year are much more recognizable than the parent company itself. So what does the company do? I guess by thinking about those brands, you might have a picture that this is the global market leader in the eyewear industry.

And it's interesting because it's the only company really that spans the entire spectrum from the more medical side of eyewear with prescription lenses, as well as frames and sunglasses on the other hand. Its business does skew seventy-five, twenty-five revenue-wise between the lenses side and the frame side. So the vision care side is the big money spinner, but it's also quite dominant in its space versus other consumer verticals.

Because it's three times the size of its closest competitor, which happens to be Alcon, which operates in a very small segment of the iWare value chain. And really it spans design, R and D, manufacturing, as well as importantly, retail, which is something that we can talk about that didn't exist before the SLR Luxotica merger for SLR itself.

And that is a huge distinguishing feature of this business versus other eyewear businesses that, for example, try to control only the consumer experience via retail or only make brands that are h sold in the wholesale channel.

And that's really because it's primarily more volume than it is value. They make a lot of very relatively inexpensive lenses and frames. There are of course the high end brands that we all know, but the bread and butter is made up at the lower end. So they sell a lot of volume, which in effect means that their overall sales are only, quote unquote, about twenty six point five billion euros, even though that's hand and fist above many of their peers.

I mean, if you try to consider, let's say, the average selling price, and this is very hard to do given they sell so many different things across different businesses. from prescriptive lenses to now smart glasses, but I kind of roughly used, let's say, two hundred Euros as an average selling price, which is perhaps even generous.

And I came up with an estimate if you assume that the average consumer is spending at SLR Lazarica about two hundred Euros a year, they're maybe reaching only a hundred and thirteen million consumers a year. And that's actually considering the fact is myopia is touching more than two billion people's lives around the world. By the year twenty fifty, it's expected that five billion people or half of the world's population will be short sighted.

So there is this question of penetration, particularly in emerging markets, where especially younger children have a much higher rate of myopia, for example, in China and India than they do in developed markets. And where they remain under penetrated. So you could see that actually the relative penetration of the products of this company should continue to increase as time goes on.

The study of course is a fascinating case study in MA and boardroom battles. The story is one of innovation, which is primarily at the Esalor level, meeting iconization, which is at Luxotica and its ability, for example, to take these dusty forgotten brands like Rayban and really reignite and catalyze growth. It's hard to remember now, but SLOR was actually all the way back in nineteen fifty nine, the first manufacturer of the progressive lens, which is very lucky.

Which was hugely influential and was also followed by several other innovations, as well as MA, such as transitions, etc. Similarly, of course, Lexotica has acquired over time these iconic brands.

first Rayban, Oakley, and then of course licenses for some very coveted luxury brands such as Chanel and Prada as well. And I think what really precipitated this merger was Del Vecchio, who was the chairman and CEO of Luxotica at the time, he was a man with a very unique vision in that he thought that integrating and controlling all aspects of the value chain in IWER was the key to unlocking value.

And of course it turns out that he was right in that this is the only company really that even today has operations across manufacturing, distribution, R and D. They have over twelve thousand patents. under their belt, which is again no small feat. That was a realization that prompted them. At that time they were really only in frames and sunglasses. And the view was marrying that with lenses would be a logical next step.

So this is really what brought about that merger at the time. And it clearly wasn't without its problems, as we will probably talk about later on.

So if we just look at the prescription lenses market, SLR Lexotica has over fifty percent of almost a fifty-five percent share of this market, and it tends to be much more concentrated in that the other players are really Hoya, Carl Zeiss,

it's almost an oligopoly. When you look at the other side of the business, which is frames and sun, that is a much more fragmented business because it's much more brand lit. And here you've got SLR Luxotico with just over a third of the market, which is decent. It is a much smaller market. So for example, if we look at prescription lenses, that would be basically the bulk of their sales would be derived in that. And frames and sunglasses, much smaller market overall. So 75% revenue from lenses.

and twenty five percent from frames and sunglasses. And here the fragmentation is such that you don't really have a meaningful number two Kering, which has brought back some of its brands in house, has set up Kering Eyewear, which has roughly a ten percent share of the market. Sophilo, which Estelor Luxotica actually tried to buy, but walked away from I should say Luxotica because this was pre-merger. They tried to buy it but walked away from it.

That has about a seven percent share of the market. But there's really not a dominant player other than SLR Gluxotica. And even here, where I would say this really differs from prescription lenses is that the other end of the market, which is a real fragmented tail.

constitutes only three percent of the market for prescription lenses, but actually it makes up about forty percent of the market for frames and size.

How do the unit economics of what they sell work? What part of the business is more commoditized versus differentiated, pre-cal versus luxury? How do you think about the different components and strategies?

which are incredibly strong brands, but still have gross margins only in the fifties, percentage wise, that gives you an indication that it's not just about strong brands. There is also a lot going on in terms of scale, distribution that drives gross margins as well. And on the other hand, SLR Lexotica's gross margins at about sixty three, sixty four percent, they've remained very consistent over the last five years.

Since the merger, management itself is not guiding to a material uplift to gross margin because they expect that these benefits from price mix will be offset by some growth at some of their insurance businesses, etcetera, where there's not as high pricing power. So I would say this business pricing power is nowhere near as high as in luxury brands where it can exceed eighty percent in some cases, but it's not also as low as footwear. So that suggests to me that pricing power is moderate.

But that you should expect some price elasticity given the market fragmentation and greater substitutability. It's not the case that you are basically

being gouged, if you will, because you have to buy a pair of Ray-Bans. There are perfectly respectable and serviceable substitutes out there in the market because of how fragmented it is, because of how relatively low the barriers to entry are, although of course SLR Lexotico would say that scale gives them an enormous benefit in terms of procuring efficiency.

It was imagined as a sort of merger of equals. Today, Delphine, which is the Delvecchio family holding, owns just over thirty-two percent of the group in terms of economic interest. But when it was actually first struck the deal in twenty eighteen, it was envisioned by Luxotica's chairman as well as Esselor's chairman at the time that the two companies and that they would actually have a power sharing arrangement equally for three years.

with Del Vecchio actually agreeing to limit the exercise of his larger voting rights and that they would wait for three years before they then jointly appointed a group CEO. And actually in practice, I mean, this is an Italian company marrying a French company

very different cultural profile, governance, managerial cultures as well. There were all of these things perhaps that in the excitement of getting the deal done had been swept under the carpet, but that actually very much came to the fore over the subsequent few years. There's a very long and publicly drawn out battle in terms of corporate governance over twenty eighteen to twenty twenty one. And these splits, it was quite damaging, I would say, for both morale, definitely the share price.

market, investor perception in the credibility of this combined management team, or even really the benefits of this merger, because of the frequency with which these governance disputes were reported in the press. Mr Delvecchio believed actually that Mr Sagnier, who was his French equivalent, was trying to grab power. Mr Sanyer fought back and said that actually Mr Delvecchio was trying to execute a nil premium merger. There was arbitration involved.

And ultimately the company, thankfully, had to perhaps not to the benefit of the press, but at least to the benefit of other stakeholders in the business, reached a settlement agreement to overcome these governance issues. This happened basically in twenty nineteen. And so now we have a co CEO structure. Well, actually there's a Luxotica CEO, Mr. Millary, who is the official CEO, and then there is the Esselor deputy CEO, Paul Dessaillon, who is also in place today.

So that has thankfully removed a lot of the distraction that the corporate governance struggles, the impact that that had on the share price for quite some time. And now we're in a different phase. But even very promptly after, actually even while all of this was going on, they decided to acquire in July twenty nineteen a company called Grand Vision, which is a global leader in optical retailing.

At that time SLR Lexotica's own market cap was about fifty billion euros and this deal was valued at about just over seven billion euros. A very similar PE, so it was a hugely dilutive deal, but it was a very long, drawn out acquisition process because the European Commission actually required a lot of concessions and remedies in order for the deal to be um approved and three hundred and fifty retail stores across Belgium, Italy and the Netherlands had to be

touted as something that distinguished them from the competition. And in this made even more sense actually in the wake of the SLR acquisition, because what SLR never had on its own was direct to consumer distribution. They had always relied on third party wholesalers So coming together with Luxotica as well as with the added benefit of Grand Vision, this really became a full service manufacturing to customer experience proposition under the uh aegis of one company.

The key feature really is under penetration in emerging markets, especially in Asia, which drives these long term structural growth trends in corrective eyewear. It's estimated that actually uncorrected Vision impairment today might cost the global economy north of three hundred dollars in lost productivity. So there's a huge economic cost to not correcting vision issues.

Then of course you have the other side of the business, which is the frames and sunglasses business. Here it's much more about brand, quite a bit of fashion as well. And here we obviously know that luxury spending, spending on discretionary items does drop during recession. And so that tends to be more sensitive. So we did actually see this during the global financial crisis, for example, where the

standalone SLR business at that time continue to grow. People of course still need prescription lenses, whatever the economy. But the sunglasses business did experience some very moderate though, mid single digit decline, which is somewhat better. than what we saw elsewhere in the luxury industry.

There may have been an element perhaps of this being an affordable luxury similar to what Estee Lauder coined as the lipstick effect, where no matter how bad times are, women will still indulge in a lipstick. Perhaps there's an element of that with sunglasses as well. But there's no doubting that actually this end of the business is more cyclical.

But if we look at the growth drivers for the eye care industry overall, it's clear that an aging population, growing population, penetration in emerging markets because of rising incomes, all of that are durable and sustainable trends for the long term.

Vision impairment is still today one of the world's most untreated and undiagnosed disabilities, basically ninety percent undiagnosed in developing economies that are at the bottom of the income pyramid, which is really quite astounding even today. the fact that innovation in eyewear is actually redefining the entire TAM. And that to me is hugely interesting because of course we have a huge hype cycle around smart classes, which to no small extent I think has

impacted Iselor Lexotica's valuation in recent months. Could they go mainstream in the same way that smart watches have? Could that unlock a huge new market? And in this the m Ray Ban Meta, which is launched in October twenty twenty three, has really been the only connected glass option to reach mass market adoption. They just said that they have sold two million units of this product.

And so I think that could be really interesting if they manage to make that go mainstream in the same way that perhaps the Apple Watch has. The other innovation could be hearing aids, where they've now announced an expansion into hearing solutions, which is basically there's a disruptive proprietary technology by this Israeli startup called Nuance, which is really at the intersection of sight and sound.

So you've got quality hearing solutions, but in the form factor of glasses. And that actually minimizes the stigma. It also addresses moderate, mild to moderate hearing loss. which is quite common to the growing aging populations in the Western world. And that again is a product that's about to be launched or is actually in the process of being launched at the moment, over the counter in the US.

at Audiologists in Europe, that could be, I think, quite interesting to see how they're able to grow their market beyond their core eyewear market.

And then down to gross profit margins, operating margins, all the money that's being spent in between those two. And then again, you spoke briefly on some of their capital allocation policies. You look at a business here that Seemingly you would expect to be somewhat capital light, but they do reinvest meaningfully below the OCF line. And just curious how you think about the financial profile of the business.

So, where is all the money going? And this is quite amazing. Half of that gross margin is selling expenses. And we must remember that they have a huge network of retail stores, roughly around eighteen thousand retail stores around the world. They also employ close to two hundred thousand people. And so that is really the bulk of the operating expenses of this company. It's also quite interesting to note that R and D, which we might expect for a company that is quite innovation heavy.

is actually only about two percent of sales and even with this, they are outspending. They are basically outspending about three fourths of the industry, which tells you maybe that the rest of the industry is increasingly becoming challenged in terms of fighting off the scalability of innovation that SLR Luxotica might be able to continue generating.

So advertising, again, advertising quite an advertising intensive business because of competition, particularly on the frames and sunglasses side of the business, that is about seven percent of sales. And then here they do have a little bit, in my view, of general admin bloat, if I may, which is about eight percent of sales, which tends to be on the higher side if you consider that they're in a hundred and fifty different countries.

fully integrated value chain, perhaps there are good reasons for this being as high as it is. I mean the company has targeted that it will over time be able to increase its eBit margin from the sixteen percent or so levels today. to nineteen to twenty percent by the end of FY twenty twenty six. It's my personal impression that that is likely to be delayed because their first priority will be to invest in growth.

And if they see, for example, smart glasses continue to grow in adoption as well as nuance the audio, the hearing aid device continue to grow in adoption, then those will be prime areas for reinvestment. And then it's also interesting that R D is only two percent of sales, but CapEx it has peaked at about seven percent, and steady state is expected to be about five percent. And so that is really because a third of that capic

is going into operations and another third into retail. So they're still very heavily investing behind their retail presence in order to make sure that they are able to sell both the enlarged suite that they are offering now to customers all within the same formats and therefore increase store productivity.

Again, I think this is a longer term margin expansion potential, probably not right away. Of course, e-commerce investment has been huge for them as well. This is an area where increasingly seven percent of their sales are coming from e commerce.

So this has required investments. So about twenty percent of that CapEx is going into investing in digital technology. And I think this is now increasingly table stakes for a business like this, which is facing competition of course from many other retailers in the e commerce arena.

And that's no longer the case, but I'm curious as people thought through some of the competitive pressures that a business like this would face, what the likes of Warby Parker meant for their business and how they've staved off such competition.

Consumer brands, for example, like Away and Luggage were competing against the likes of Samsonite, Warby Parker and IWare competing against SLR Lexotica, and they were seen as disrupting what had traditionally been seen to be very staid, dull but worthy industries. And so Warby Parker's model was really to own the customer experience.

And outsource mostly everything else. Not everything, because they did control the design element. But for example, manufacturing was done at third party manufacturers and they basically controlled the design and the retail elements.

So that digital first model was a huge success during the pandemic, but they've actually struggled to turn a profit. And if you contrast that to SLR Lexotica at sixteen percent EBIT margins, that's the Quite a contrast and it's quite telling that actually the value of scale and the benefits that vertical integration have had for this business have been huge.

And it's also I think the case that consumers, especially post pandemic, have voted with their feet in that they want choice. So I think what was Warby Parker's strength at the beginning, which was that single brand focus.

has now perhaps emerged to be a little bit of a weakness in not being able to give customers the full spectrum of alternatives that might be available out in the marketplace. I mean the other key is of course that SLR Lexotica has global scale. It's in one hundred and fifty countries, while Warby Parker is still very US Canada focused and so their sales today are still sitting at about two percent of SLR Lexotica's sales.

That's I think the real difference is that what was seen as a disruptor is really perhaps now just sort of a me too wannabe player rather than a true disruptor.

thirty five billion euros of revenues or so. And I think the big difference here is that the independent eye care channel is much more important in North America. It's actually over half of their revenues come from the independence.

But their product mix actually is overwhelmingly lenses and then frames. So sunglasses is probably the smallest element of the market in North America. And then you've got EMIA, which is actually just slightly bigger if you consider that You can split that into developed Europe and emerging Europe combined, that would be bigger than the US, but actually developed Europe is slightly smaller than the US business.

And here the channel tends to be today also still quite fragmented, even with the Grand Vision acquisition. So about fifty nine percent of their business or so is coming from independence. And I think the only market really where this is not the case is in Asia. So in Asia Pacific, independents are a much smaller proportion of the market, while brick and mortar, retail and e commerce tend to dominate.

That is, of course, still today, despite the size of Asia, it is smaller than both North America and Europe. But of course, with a huge optionality in terms of upside given that children in Asia are most in need of corrective lenses because of a higher prevalence of myopia in that market versus anywhere else.

I also want to talk about some of the acquisitions that they've done. Supreme obviously stands out as a bit of a funky one. What is their strategy for growth and what is informing some of these strategic endeavors that they're undertaking?

I'd say the most left field of these was perhaps the Supreme Streetwear brand from Vf Corp last year in twenty twenty four, which they paid one and a half billion dollars for, which itself was actually less than what Vf Corp paid to buy it a few years before that even. But there's some question marks that the market had at the time of the acquisition, but I would say they've somehow been given a free pass on this deal since the smart glass phenomenon took off.

So I think since the end of last year the relaunch of Meta Ray Ban, because of the integration of Meta AI, which did not exist in the earlier iteration of Ray Ban stories. has really made this popular and ready for takeoff. And because of that, I think people have been a bit more forgiving, even though Supreme as a streetwear company has no complementarities to SLR Luxotica's core offering.

I believe the reason for doing this deal is that over time they will seek to do a version of the meta Ray Ban with Supreme as well. Supreme tends to skew much more Asian, much younger, much more Gen Z. So in order to popularize smart glasses among that demographic, it's possible that Supreme becomes the brand vehicle to do that. in the way that Ray Ban and Oakley could do the same thing with slightly older consumers

more in developed markets. I think that is a potential reason for doing the deal. If it was just to sell hats and T shirts with Supreme emblazoned on them, I'm really not sure this was the best use of one and a half billion dollars of shareholder money.

Smart watches are estimated to be worth about market size of about thirty-four billion dollars, and smart watches maybe about three billion dollars. So there's a huge gap, I think, in terms of potential, although you could argue that the form factor of a watch lends itself to much greater adoption than perhaps a smart glass.

But I think AI is the key unlock here. And so meta AI powering Ray Bans is a fundamentally different proposition from the old Ray Ban Stories one point oh, which had much more limited functionality. We don't have a lot of details in terms of how the economics are shared between the two companies on the sales of the meta Ray Ban product. The companies both are quite cagey about it, other than to say that this is a long term partnership and they want to continue to innovate.

I do think that they're building capacity at the moment to sell up to ten million units of this. They sold two million units of the Meta Ray Ban glasses last year. It's priced surprisingly affordably at just about three hundred dollars a parent retail in the US. And I think the reason for that is their attitude that if you build it they will come.

And so the idea is to increase adoption before competition comes and staves off their growth potential. I don't know that this will necessarily be successful because this is an inherently competitive space. They have a first mover advantage.

But they may not be ultimately the winner in this space, depending on functionality that comes out. Perhaps Apple comes out with its own version of the smart glasses with superior functionality, or any other player, for example. I just read about it. A voice assistant called Sesame.

which makes AI glasses and they're apparently very highly rated as well. So I think this is going to be quite a competitive space. It's quite different from anything SLR Lexotica has done before because they don't own this technology. They don't own meta AI functionality. So that partnership model will be interesting to see how that evolves and it'll only be as successful as meta AI itself is successful. I

But actually its own competitors are also its clients and customers because it has an open network framework. So they very proudly said, for example, at their Capital Markets Day that Hoya, which is technically one of their competitors, they're also one of their big customers.

And similarly, carrying eyewear works closely with SLR Lexotica as well, given that the DTC, the retail network of SLR Lexotica is actually a significant customer of the carrying eyewear, the Gucci sunglass brands, for example, selling them in their stores.

So I think that is an interesting feature. You would never find, for example, at Azara store something from H and M. So that is quite different about this business, that open architecture sort of which helps them scale up, and then that scale is a virtuous cycle that allows them to reinvest behind their stores, but also behind innovation and R D. Investment in R D has actually driven significant

proprietary IP. They have about over twelve thousand patents pending or granted across over two thousand patent families. They have about nearly twenty-one thousand trademarks that are pending or registered.

And so that innovation really is going to come to center stage because it's across all of their major areas. It's across vision care, eyewear design, technological innovation, it's across smart eyewear. Sun lenses, they have over fifty Sun lens researchers to think about new mold processing and optical technologies, as well as of course digital transformation.

So that is that in store experience with an option to explore the complete collection digitally, the face scanner technologies that help you, the virtual try-on on rayband.com. I have to say I've personally been quite impressed by this when I was recently in the market for a pair of meta raybans.

And so all of these, I think, help it distinguish itself from the competition. But the real secret sauce is this vertical integration, because that is quite unique about this company and to cover every step of value creation process. Focusing on manufacturing, the service, all while having a very geographically diversified footprint.

is quite complex and it's not an easy feat to be achieved by many companies. And so I think that's why maybe the mid teens margin is actually fair, mid to high teens. I'm really not sure that that twenty percent target that they're pushing for may necessarily be achievable given the complexity of operating this business. And of course we haven't even touched upon tariffs yet. That could also be a potential spanner in the works of their margin ambitions.

But that secret sauce, at least their scalability and relative competitive advantage, should continue to be enhanced because of their vertical integration.

But when you consider kind of uh sleepy categories such as retail, you typically don't see much in the way of antitrust action. And I guess my curiosity is headlines suggest that they face these trials. What is the concern and how do shareholders weigh what the actions being pursued against SOR like Luxada may or may not be?

So you're not obliged to buy something that is made by SLR Lexotica that gives them a higher markup than one of their competitor brands. I mean sunglasses, anyone who's ever spent any dead time at an airport trying to find something to do. And has stopped by a sunglass store has you only have to see how many options there are for you to know that no company really has dominance or pricing power in this category.

Then we can look at the eyewear side of the business and here you could say that perhaps this is similar to pharma in a sense where innovation does get rewarded with pricing power. So for example, the nuanced hearing aid technology could retail for about fifteen hundred dollars, but that is OTC, that's private pay. You've got Stellist, which is their offer to actually arrest myopia in young children, which is hugely valuable.

So that before the retina changes shape and the lens needs permanent correction, they're able to actually slow down the progression of myopia with stellus. And you could argue that that innovation should also carry a premium should you want to maybe buy those products. But in their core bread and butter business in lenses, it's very, very hard to argue that they actually have meaningful pricing power that is taking advantage of consumers.

There's no evidence that I can see of this, given that the market still is fragmented, even if in the lenses side of the business they're a little bit more dominant. On the sunglasses and frame side of the business, I would find this incredibly hard to believe given forty percent of the market rests in other non-big player companies.

to use the T word I hope are transitory and some effect, but obviously will have competitive impacts on their ability to kind of sell cross border. But I guess I'm curious What are the lessons that you take away from studying a business like this that you think A can be applied to other businesses that you evaluate for investment and B strategically where you see parallels to investments in your coverage universe?

but perhaps also discipline when assessing prospective returns, future returns from a current investment. And here if you look at what they did, for example, with Ray Ban, this was a brand that had been all but left for dead at Baushan Lomb.

they transformed a struggling brand into a three billion plus annual revenue powerhouse. I mean it did take them fifteen years, so it wasn't overnight, but they did have the wherewithal to do this, which is interesting considering the history of the brand from being launched for the US Air Force during World War Two. to then its eventual Hollywood associations and becoming an icon, but we now perhaps forget that that process actually took many decades.

And then of course they continue to build their dominance in terms of acquiring Oakley, to build dominance in sports eyewear. They actually bid out several other bidders for this brand. And again, grand vision, which perhaps no one thought that they w had the appetite to do considering they were going through their own complicated merger, that actually expanded their retail dominance further, ensuring direct consumer access to their products worldwide.

So I think that appetite for deal making, but also with a sensible rationale, and here we have evidence that they have walked away. They've said no when deals don't make sense. For example, in two thousand and nine, this is Luxotica. They were considering acquiring the financially troubled Sephilo Group, which is an Italian eyewear manufacturer, and actually they decided against it because it didn't make financial sense. So I think that disciplined approach

while seizing the day but also knowing when to say no is an important lesson for investors as well as operators. And then I think also perseverance and risk taking in new businesses. The first iteration of smart glasses, I mean let's look all the way back to Google Glasses let's face it, it wasn't a fantastic offer for consumers. We then had Ray Ban Stories, the first version, which didn't really take off.

But I think now Meta Ray Ban has really struck a chord at somewhat right time, right place, because of AI and the integration, which has made it that much more interesting. So the question of continuing to tweak that proposition until the consumer readiness is there.

is something that has come to this company quite naturally and as part of its evolution. It's not a, well, we tried this, it didn't work, let's move on. But also I think the ultimate lesson is that if you see these otherwise lowish margin businesses Vertical integration is the key to unlocking value and it doesn't work all the time. We saw this end quite badly post pandemic for say brands like Nike and Adidas, which tried to go completely DTC and forego wholesale.

There the consumer wants choice. They want to be in a multi-brand environment, but the beauty of SLR Lexotica is that with its 150 brands and plus its retail channel where it can offer other brands, that it is able to do that.

And so I think that has also been a major driver of margins which are now at sixteen percent versus just above half of this about seven or eight years ago. I think the other lesson of course is you don't air your dirty laundry in public because that corporate governance boardroom battle that we saw between twenty eighteen and twenty twenty one was quite distracting to the core investment thesis and I presume for management internally as well.