Carclo plc (CAR.L) Earnings Call Transcript & Summary

Good afternoon. Ladies and gentlemen, welcome to the Carclo plc Preliminary Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today, and publishes a response where it's appropriate to do so. Before we begin, we would like to submit the following poll. And if you give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand over to Joe Oatley, Chairman.

Thank you. Good afternoon, everybody. I'll just do a couple of introductions before we start. To my immediate left, we got Frank, the CEO; and to my far left, David, the CFO. Just a few words of introduction, then I'll turn over to Frank and David to take you through the presentation. I think if you've had a chance to look at the preliminary statement, you'll have seen it in the numbers. It's been a challenging period for us, no surprise given the economic conditions that we've seen. But I think we are making some really good progress. You'll hear from Frank, the strategy we are now following. We're seeing results of that coming through where it's always been pushed through, and it leaves me very excited about the future. So I think with that, I'll hand over to Frank, and he can take us through the presentation.

Thank you, Joe. Yes, welcome to Carclo's preliminary results presentation. In the company overview, Carclo's pointed different [ traits in ] the market, ways in the fact that we feel to have a fully integrated approach, which ensures a seasoned exceptional experience for our customers. We take it from original product concept idea to global delivery of the precision components. At Carclo, our CTP division, the design engineering, does the group who believes the way in developing cutting edge mould and automated solutions, working closely with our customers to ensure the long-term success. Meanwhile, our marketing solutions team focuses on specialized manufacturing processes, offering the full range of services from high-precision injection molding, assembly, decoration and supply chain solutions. [ Dependency ] is our priority in every step of that process, and in the ever-evolving aerospace sector, Carclo takes the flight by delivering superior high-precision fast rate component. And as the industry emerges from the challenges faced to us by COVID-19 pandemic, we are ready to contribute into the resource and by a pivotal role in shaping the future of the aerospace associate division. At Carclo, we're globally connected. We're totally driven by position with 13 factories all over the world and more than 1,100 dedicated colleagues. We prioritize excellence in everything we do. We then move over to the business highlights. As Joe said, this year has brought our transformational shift in our company will revitalize strategy and a team of exceptional individuals taking at the helm in the second half of 2023. We have faced and overcome challenges, rising debt costs with soaring input expenses and ever evolving market dynamics. Today, we stand proud of the position to improve the resilience and agility of our company. Our relentless drive for operational excellence is well underway. We've made significant strides, especially in the EMEA region, but we have knowledge that the path ahead of us remains steep. Yes, we are consistent with our commitment to further progress. We're continually pushing the boundaries of what we can achieve. Through reservable and time, our market performance has remained robust. Our design and engineering and manufacturing solutions have shown an undergoing strength, while our Aerospace division has experienced a very captive rebound towards the pre COVID-19 levels. These achievements reflect our unwavering dedication, precision and commitment to deliver the exceptional results. Financial health has been a primary focus. We've undertaken a strategic initiative to rebuild our margins or divide our financial position. By implementing focused working capital and capital management, we've significantly enhanced our cash conversion rate to 84% and making significant step towards addressing our debt outages. Investing in our people and infrastructure is at the core of our strategy. We firmly believe that the [ functionality ] and that's why we made substantial investments in training, facilities and programs. Our commitment to sustainability is unwavering and will be demonstrated by the launch of our Zelda initiative, which aims to reduce debt and optimize energy consumption. Let's delve into the numbers on the right-hand side of the slide. Our cash conversion rate has nearly doubled from 43% to an impressive 84% this year. With regard of our net debt, our year-end position just adds GBP 34.4 million, representing a decrease from GBP 36.5 million at the end of the first half at constant currency, albeit a slight increase from the GBP 33.9 million last year at constant currency. We made further significant process after year-end, as David will take you through later in the presentation. Furthermore, our revenue has grown organically by 3.8% at constant currency rate, reaching GBP 143 million compared to last year of GBP 138 million. In conclusion, Carclo is forging ahead with a firm determination. Our new strategy focuses attention to cash management has led to rock solid foundation for our future endeavors. As a global connected company, we are poised to increase the resilience, enhance agility to move forward in these times. What we've done as a business. So as we go through the CEO highlights, our fundamental principle takes encourage. Our unwavering dedication to health and safety. So health and safety is not simply our top priority. It is ingrained in our new corporate DNA. It goes beyond rules, guidelines. It's just a mindset which shapes every decision we take every day. We are fanatical about the supporting principle, and we are sure the presence of it at every level of our organization. And the commitment to health and safety exceeds far beyond our workplace. It's an assurance of our employees and their families who entrust us in their well-being and rightly expect nothing less. At the core of our transformation journey is the Carclo chains, operating united as 1. Their wavering dedication, resilience and commitment to excellence have been key in navigating our strategic shift. Our leaders, recognizing the collective strength of our team had provided an unwavering support for the group's financial strategy shift and acknowledge the invaluable contributions of each individual. We're immensely grateful for the team's commitments. And our team focus goes beyond words. It showcases through our actions. We are encouraging a culture of diversity, firmly believing that a diverse perspective enhances decision making and improve -- drives improvements. Empowering voices various backgrounds is not just a value we uphold. It encourages our collective knowledge and capability as ensuring that every team member feels heard and valued. Our success is built by the collective front, resilience and [ built relation ] of the entire corporate family. Together, we are performing in future and surpassing expectancies. Regionally, our primary focus has been on restoring and strengthening our margins. Through a strategic realignment of our facilities, particularly in the EMEA region, we have achieved positive encouraging results. This successful transformation follows our confidence in the effectiveness of our initiatives. In the U.S., we're currently resetting our operations, and while it remains a work in progress, growing insights or progress have already emerged. Our commitment to restoring margins and optimizing performance is clear, and we're determined to capitalize on the opportunities that lie ahead. We've also made significant strides towards sustainability, exemplified by the launch of the Zelda initiative and our strategic partnership with EcoVadis. These initiatives signify our dedication for serving the environment and contributing to a sustainable future. Despite market fluctuations, our revenue has demonstrated resilience, reflecting our team's ability to adapt and navigate through challenging conditions. This underscores our commitment to delivering consistent results and driving sustainable growth with a goal and proactive approach will constantly evolve season opportunity to stay ahead in this rapidly changing business environment. So reflecting on the numbers again on the right-hand side, our incident frequency ratio, which covers all health and safety incidents from bumping your [indiscernible] to more severe things, has shown substantial improvement from 2.55 to 1.47. This reduction reflects our relentless emphasis on safety and our ongoing efforts to make our workplace even safer. Female representation of our senior executive level has taken an encouraging lead from 11% to 31%, symbolizing our commitment to diversity and inclusion. Our energy intensity ratio, which is the amount of tons of CO2, we even met per GBP 1 million of sales, has also seen a commendable reduction, shrinking from 172 to 155 tons of CO2 per 1 million of sales, marking a significant step in our sustainability efforts. In conclusion, we're steering change. We prioritize safety, improve performance and prioritize people. This transformation is the beginning of an exciting journey ahead. So let me go over to David, who will guide you through the financial overview and our business performance.

Thank you, Frank. I'm really pleased to have this opportunity of sharing with you our financial performance for the last year, and in particular significant progress the business has made over the last 6 months as we've begun implementing the new strategy with Carclo. So I'm going to start with our new financial KPIs. Recognition of the new strategy and our focus on driving improved returns, generating cash and reducing leverage, we have refreshed our KPIs to reflect the measures that we think over the coming years will demonstrate the progress that Carclo is delivering. So starting with our revenues, full year revenue of GBP 143.4 million was up GBP 14.8 million on last year. The growth at constant currency is 3.8%, with overall volumes broadly flat after price increases and energy surcharges. Moving on to the underlying operating profit of GBP 5.9 million, slightly below the prior year with a similar H1-H2 split as last year. The business has faced significant cost inflation and is in a lag in cost [indiscernible] to customers, but we are firmly focused on restoring and growing our margins. We first measured our profit is the most relevant to the Carclo business that represents the returns we're generating after covering the cost of our capital that we are using in the business. We do operate in a capital density business, and making a healthy return on those assets is essential for us to be able to create value for our stakeholders. The chart on the bottom left shows the operating return on sales. And as you can see, similar to last year, the returns in the low single digits, they do reflect the inflationary purchase on the business. Clearly, we're looking to deliver significant improvements in our ROS as our strategy delivers on the revitalization of our operations, as Frank has already touched upon. And then finally, our underlying earnings per share, of which at 0.4p for the year compared to 3.1p in the prior period. Then moving on to our KPIs covering our cash, our debt and asset utilization. We regard these as being just as important, if not more so, the previous measures for sales and profit. To be successful, we have to convert our profits into cash. We need to reduce debt, and we need to generate value by making returns on our assets that are higher than our cost of capital. We need to work the assets hard. Our cash conversion in the year, measured as cash generated by operations divided by EBITDA at 84% was a solid performance, and it reflects the progress we're starting to make in applying strong disciplines around our working capital. Our net debt comprising our bank loans less capital balances plus outstanding lease obligations was at GBP 34.4 million at the end of March. Whilst this was GBP 2 million higher than at the start of the year with FX being a significant contributor to this. It's pleasing to note that in the second half, we delivered reductions in both the bank and lease debt balances in line with the strategy of deleveraging the balance sheet, and I'll talk you through that in more detail in a moment, including an update on additional repayments we've made on the bank debt since the year-end. Our return on capital employed was similar in H2 to H1 at around 7%. This is clearly below the underlying cost of capital and it's important that we improve our ROCE to get to 15% target we've set for the medium term. We will improve our returns by working the assets in the business harder. And our measure the fixed asset utilization is a good external indicator on this. It's defined as the ratio between revenue and tangible fixed assets, and it's pleasing to see in the last year, we delivered progress on this with revenue at 3.2x the value of assets compared to 2.8x in the prior year. So moving on to our summary income statement. The underlying operating profit before exceptional items of GBP 5.9 million was broadly similar to last year, once adjusted for the U.S. COVID grant that was booked in the prior year. This incurred restructuring costs in the year, mainly noncash and are essential to improve the business for the future, and these have been treated as deduction. Total net exceptional charges were GBP 4.7 million, and I'll take you through those in more detail in the forthcoming slide. Finance expenses, interest of GBP 4 million was GBP 1 million higher than the prior year, reflecting the unprecedented increases we've seen in interest rates over the course of the year. Overall, this resulted in a loss before tax of GBP 2.5 million compared to GBP 5.9 million profit in the prior year. The tax charge of GBP 1.4 million was up on the prior year. We do currently incur tax on profits generated within our international operations. Also, the 2021-'22 taxation charges did benefit from a deferred tax credit of GBP 0.7 million. However, this year, we have seen a reversal of that tax credit due to the effects of the U.K. restructuring plans. Looking ahead, we will be seeking to improve our overall effective tax rate. The after-tax loss for the year of GBP 3.9 million compared to a profit of GBP 5.8 million in 2021-'22. This next slide shows the breakdown of exceptional charges. We incurred significant restructuring costs in the year as we implemented the new strategy with headcount reductions in the U.K. business with work transferring to our most efficient operations in the Czech Republic. We also recognized GBP 877,000 in respect of the cancellation of future supply agreement, reflecting recoverable value of assets. Following a full and final settlement with the customer in June this year, we do expect to recognize approximately GBP 600,000 of exceptional gains in the current year related to that contract. We also provided GBP 896,000 [ restructured ] potential customer failure in the U.S. We've made provisions of GBP 0.3 million in respect of legacy health claims. And finally, we recognized an exceptional gain of GBP 769,000 during H1 in respect of the GBP 2.8 million sale leaseback of our Tucson property in the U.S. So overall, net cash impact of the exceptional charges of GBP 0.6 million inflow. Then moving on to our balance sheet. The movement in tangible fixed assets reflects the ongoing depreciation as well as the impairment related to equipment, of the canceled supply agreement. Our inventories have reduced since the start of the year from GBP 17 million, ending at GBP 15.2 million as we implement stronger discipline around our working capital. We ended the year cash of GBP 10.4 million, broadly flat on the position in September, and this compares to GBP 12.3 million at the end of prior year. We've upgraded our treasury function during the year, and we're looking to run more efficiently and have less unproductive cash around the group, whilst meeting our normal liquidity requirements. As you can see from the gross debt number, covering bank loans and lease obligations, it's flat on the year at GBP 44.8 million, but down GBP 2.8 million from the half year. A lot of the movements on net debt in a moment. Following the year-end, I'm pleased to be able to confirm that we've made additional unscheduled loan repayments of GBP 2.7 million. And in addition, we've paid GBP 1.5 million of the revolving credit facility, reducing its balance of GBP 3.5 million to GBP 2 million, giving us GBP 1.5 million of available headroom. So our cash flow, we generated GBP 7.8 million of cash from operations, that's GBP 1 million more than in the previous year. This was after making pension deficit reduction payments of GBP 2.7 million. As I've indicated, we're prioritizing the rate at which we convert our profit to cash. So this progress is really encouraging. The overall movement in cash in the year was an outflow of GBP 2 million with cash being used to support capital investment, bank interest and the scheduled loan repayments. So moving on to the position with net debt. On this slide, I've set out a bridge showing the movements in net debt across the year. Restating the opening position of GBP 32.4 million for currency, given adjusted starting points of GBP 33.9 million. And as you can see, the gross movements, overall, they gave a GBP 0.5 million increase in net debt over the year. However, I think it's important to consider how net debt has evolved during H1 and H2 separately, and this is set out on the following slide. As you can see here, it's so much a game of 2 halves. During the first half, as a result of the currency headwind and increases in working capital, we experienced an increase in net debt to GBP 36.8 million. But during the second half as the new strategy has started to come through in our performance, working capital has been matched down by GBP 3.3 million, also with slightly low capital expenditure as we move our priorities to implementing rapid payback, continuous improvement projects. So over the second half, despite the significantly higher interest payments, net debt dropped to GBP 34.4 million compared to GBP 36.8 million at the end of September. And then finally, for this section, let me update you on the situation with pension. So overall, the IAS 19 deficit increased during the year from GBP 26 million to GBP 34.5 million. This is mainly as a result of the volatility market in wake of the mini budget last September, which caused an unrepresented spike in bond yields. While this resulted in higher discount rates and a significant reduction in the present value of pension liabilities, these movements were hedged by liability-driven investments or LDI. Other investment asset classes also saw negative net returns over the year, and that's contributed to the overall increase in the IAS 19 deficit. It's worth noting that the last triennial actuarial valuation of the group pension scheme was started out in March 2021. And this reported a significantly reduced technical provisions deficit of GBP 82.8 million compared to GBP 90.4 million at the March 2018 valuation. During the year with gross payments into the scheme of GBP 4.1 million, in line with the agreed schedule of contributions, and we continue to work very closely with the trustees to ensure we satisfy our obligations towards our pension scheme members. I'll now hand back to Frank who will take you through the business performance in some more detail.

Thank you, David. So let me run you through the business highlights of design and engineer first. We achieved a robust revenue of over GBP 20 million, demonstrating our long-term growth. The design engineering sales remained steadily high than over the last 3 years, showcasing strong partnerships and our existing strategic customers, mainly in the Life Science segment. We entered the new year with a very solid order book and promising opportunities for continued success. We're establishing cutting-edge trading facility in our Pennsylvania location, ensuring utilization and a clear focus on validation and education for the new products, mould technology and materials. We're continuously enhancing design and engineering capability to deliver more innovative solutions to our customers. We take a few on our Manufacturing Solutions business. We have achieved a modest rise in sales to GBP 116.7 million, driven by pricing adjustment and energy surcharging, leading activity levels broadly flat. The CTP division in total has delivered an operating profit of GBP 7.2 million, which is lower than the previous year due to the absence of the COVID-19 grant income. We have responded strictly to the cancellation of the major framework agreement related to COVID-19 testing products, and we'll be redeploying the assets and negotiate a satisfactory settlement with the potential new customer. Continued investment in automation to enhance operating efficiency, speed addition are supported by robust data collection and analysis. The factory focus on specialization is progressing towards operational excellence and streamlining manufacturing processes through factory specialization, during -- resulting in improved performance and asset utilization and labor efficiency, especially in the EMEA region. The Aerospace division achieved a significant revenue growth of GBP 6.6 million in the year '22-'23, driven by the Aerospace industry's post COVID-19 recovery. Demonstrate strong profitability with an operating profit of GBP 1.5 million, highlighting our ability to generate sustainable profits in the segment. We maintained a healthy order intake, reflecting the strong demand and the customers expanded production schedules within the Aerospace sector. Faced longer lead times with specialized materials is impacting our cash conversion rate with the Aerospace business due to the increased inventory levels. With the Aerospace industry experiencing a positive upstream, we are well positioned to capitalize on further growth opportunities, leveraging our expertise in producing high-quality precision components and meeting the stringent safety requirements inside the Aerospace business. We're proud of the revenue growth, strong profitability, and our ability to navigate the supply chain challenges, which are currently going on in the aerospace sector. No presentation of Carclo is complete without shedding the light on the right movement of raw materials and energy, which are shown here to gross. We encountered time delays in part on raw material pricing movements, and as the graph on the left-hand slide shows, we encountered a spike of price increase at the beginning of the year, followed by a very gradual downward trend towards the year-end. As we are painfully aware, the energy cost has risen massively last year. Significant increase in the energy cost has added pressure to our margins. Despite the fact that the price has come down from the top of over GBP 500 per megawatt hour, they are currently still very high compared to historic averages of GBP 40 to GBP 50 per megawatt hour. Yet we refuse to be a passive observer in the challenges included the inflation of labor costs. We have proactively and resiliently tackled the issues head on. Our strong strategic partnership with our clients play a pivotal role in navigating this period of economical difference. Besides the needed implementation of energy surcharges by the end of last year, we are simultaneously eliminating all high energy consuming machines. We are excelling our back-end automation programs enhancing the stability performance and improve our overall labor efficiency. In response to the ongoing inventory costs, we also have adjusted our sales pricing strategy to align with the new proteolytic. These proactive measures combined ensures rebuilding our margins while simultaneously maintaining our competitiveness in the markets. Achieving operational excellence, creating value remain at the forefront of our focus. Through continuous improvement and strategic initiatives, we are committed to optimize our operations, and our efficiency and deliver exceptional value for our share of stakeholders. Due to the market dynamics across our sectors, the bar charts on this slide show the relative importance of the margin in our overall revenue. In the Life Science segment, even as the growth related to the COVID-19 testing is moderating, we are focused on capitalizing on the sustained expansion of the life science market. Our attention is particularly focused on supplying the growth opportunities in the APAC region. In the real market, Precision Technology, as the market of traditional ATM evolves, our precision-engineering parts and are more and more playing a crucial role in driving the advancement of safety products and expanding the boundaries of home automation. Our Specialty Optics business is responding to the increased demand of sustainable, high-performance, L&D light managements, a architectural, horticultural and safety environments. Here, we are delivering innovative and tailored optical solutions. As alluded before, the Aerospace business is leveraging our risk experience and precision to address the industrial recovery after COVID-19. We're champion in resuming supply chains and greener aviation with our advanced, reliable cable and safety solutions. So across all the sectors, we are harnessing ingenuity and resilience to redefine products and processes. Our goal is to create a robust framework that puts agility and adaptability at the home, empowering us to rapidly respond and thrive with the ever-evolving market landscape. As we dove into our regional development, let's examine the unique growth patterns and the resilience we displace at our global footprint. The bar charts again on this slide shows the relative importance of the regions and our overall revenues, and the arrow is the year-on-year movement. In the EMEA region, our strategic approach of streamlining factory specialization has driven impressive results. Our U.K. facility has optimized long-run processes and implemented back-end automation resulting in a heightened efficiency and productivity. Likewise, our [indiscernible] has excelled in medium series production, showing quick changeover and stable automation expertise. These specialized capability have not only improved operational efficiency, where [ EV ] has fostered regional synergy, propelling us towards a sustainable profitability. The overall trajectory of the performance underscores the success of our factory specialization strategy in the EV region. Shifting our focus to the Americas. We have initiated the strategic refinement to product-focused growth. Our U.S. sites currently have very diverse product types, run lengths and machine parts. To enhance our competitiveness, we are actively working on implementing our factory and machine specialization strategy. This entails evaluating our product portfolio and identifying opportunities for optimization. Ensuring the delivery of strategically aligned offering and cost-effective and market-oriented product lines. Our streamlined operations and aligning them with market demand, we aim to enhance the group performance, strengthen our competitive position and seize dynamic market opportunities to solidify regional presence in the Americas. In the APAC region, we have successfully adapted to the unique market position. While our sales might have declined compared to previous years, it is important to notice the context. In the previous year, we have supported from our APAC facility the capacity in the U.S. in meeting the demand of a major blue-chip customer. This highlights the strength of the One Carclo concept, where we seamlessly support our global customers throughout the world. In India, we're shifting our growth gradually towards local medical devices as the markets of the traditional ATMs is evolving. This strategic move positions us for long-term growth and aligns with the changing dynamic of the region. While the transition might have impacted our overall sales in the APAC region, it reflects our commitment of staying agile and capitalizing on the right opportunities. We remain resilient and proactive in navigating the dynamic and market environment in the region. Our ability to leverage opportunities and to align our strategy with regional demand is key to ensure a robust performance. The growth in the Aerospace sector is the evidence of the successful leveraging of our century-long experience, and the industry's recovery post COVID-19, and converting new market opportunities. The growth story here is to combine regional effect and the industry-specific strategies. These efforts are the bedrock of a strong foundation that we're building. We're not just navigating the present market conditions, we're steering ourselves towards sustainable growth and successful future. This resilient approach stands as a testament for our unwavering commitment to our shareholders, our employees and the communities we operate in, truly building a strong foundation for future growth and success. So let's explore the key commitments that guide our journey towards stability in growth. These strategic pillars are the foundation of our operations and shape our path forward. As always, first and foremost, health and safety is at the heart of our operational DNA. We prioritize health and safety for our colleagues, raising their safety as the cornerstone of our operation. Strengthening our balance sheet is another pillar of our strategy. We strive to enhance our financial health optimizing the value we get from our expenditures, improved cash conversion and thereby structurally reducing the net debt loss. As David alluded to in his presentation, we have made significant [ changes ] during the second half and post year-end. These measures ensure a strengthened balance sheet that supports our long-term financial stability in growth. Investing in our employee's development is a crucial commitment to us. Through regional education and excellence centers, we empower our workforce for professional enhancement opportunities. By nurturing their knowledge, we foster a culture of continuous improvement and growth. Focused operational excellence is the key of our strategy. We maximize utilization and efficiency by standardizing processes and equipment. This approach allows us to streamline operations, eliminate redundancies and achieve optimal performance across facilities. In line with our product focus, we capitalize on our unique strengths within its factory facility. By embracing factory specialization, we enhance efficiency, we drive focused performance and deliver unrivaled customer value. This strategic alignment allows us to leverage the expertise of our team and offers a tailored solution that exceeds customers' expectations. Embracing sustainability is a core aspect of our strategic approach. We integrate environmental care, social fairness and economic vitality into the very fabric of our operations. By setting new standards, we contribute to a more sustainable future for our [indiscernible] communities. In summary, our strategic commitment direct our journey. By steering towards stability and growth, we prioritize safety, strengthen our balance sheet, invest in employment, employee development and pursue operational excellence and focus on product specialization and embracing sustainability. Together, these pillars guide us toward a future of resilience, prosperity and sustainable growth. Embracing sustainability is more than just a business initiative for us. It's a reflection of our commitment to the world we all share. We know that this requires a proactive and transparent approach, and that's why we are committed to openly sharing updates on our achievements addressing how changes head on and take you with us as we outline the future steps in the journey. A significant milestone of our sample journey is the project Zelda. Through this ambitious initiative, we aim to drive waste reduction by 50% in just 2 years. We're also targeting a 5% annual decrease in our energy consumption per kilowatt of good products. I understand these are not the easy targets, but we are committed to reaching them for the benefit of our environment and our company. We understand the importance of partnerships in amplifying our sustainability impacts, as we're not alone in the supply chain. As such, we have teamed up with EcoVadis, a global leader in advanced business sustainability ratings. This collaboration allows us to develop and implement a comprehensive improvement plan throughout our supply chain, advancing our sustainability in a really impactful way. In essence, we're embracing sustainability as a fundamental part of our future, and we're excited for the positive changes it brings to us. So as we conclude this presentation, let us emphasize that the transformation for us is not just merely about change. It's about having a purposeful journey of resilience and determination. Our strategy and team transformation encompass implementing new strategy, forming a diverse and dynamic leadership team and reenergizing our focus on employees and customers. This part, those three has already shown promising results. Early signs of improvement, particularly in our EMEA operations, reinforce the confidence in the effectiveness of our initiatives. Ensuring financial stability has been a crucial pillar of our transformational journey. We successfully renegotiated banking governance up to June 2025, providing us with a solid sign to foundation to continue to strengthen our balance sheet with the revised and refocused new strategy. We have actively capitalized opportunities as evidenced by the recent project range with existing strategic customers. These successes demonstrate our ability to navigate challenges, seize improvement opportunities and effectively execute our strategic plans. Looking ahead, we harness the potential of our new strategy and new leadership team to overcome challenges and drive sustained success. We remain committed to the diligent execution and strategic approach ensuring that every step, no matter how steep, will bring us closer to our goals. So let me leave you with this final part. The transformation we are embarking on at Carclo is not a near or short-term goal or a simple pivot from 1 state to another. It signifies the dawn of a new era. It defines resilience, innovation, sustainable growth. We are not just navigating to change. We're driving it. We're taking control of our destiny as we forge ahead into the future. While our journey might be challenging and the stock is half is deep, it is also abundant with immense opportunities, supported by a new strategy, a dedicated team and your [indiscernible] support. We are ready to seize every opportunity through transition and vigor. We're engaged with all stakeholders, reenergized the business and execute our new strategy with determination and innovation. To date, right here on this video, the Carclo of the future begins. Together, we will take the next step towards a brighter, more sustainable and more prosperous future. With collective assets, determination and innovation, we are shaping it tomorrow as soon as possible, nevertheless wider stream. I want to thank you for your time, your support and for being part of the incredible journey of transformation. Together, we will not only survive the changes to come, we will thrive in them. We look forward to sharing our successes, lessons learned and achievements we do and look forward to heading to the future. Thank you.

That's great. Thank you Frank, David, Joe, thank you very much indeed for updating investors this afternoon. [Operator Instructions]. Frank, David, Joe, will you just bring up your cameras if that is possible. Perfect. Ladies and gentlemen, I just want the company take a few moments to review your questions. I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via your Investormeet Company dashboard. Joe, as you can see, you've received a number of questions from investors throughout your and Frank's presentation, the presentation this afternoon. If I may, if I could just hand back to you to read out those questions and obviously, your responses where it's appropriate to do so, and I'll pick up from you at the end.

Yes, of course, thank you. First question is on marketing. What impacts or changes to your pricing, what is that on sales and/or winning new customers, as customers naturally evolved and I think probably that's one for you, Frank.

Yes, the customers are living in the environment and they also have to find bridge to get the inflationary cost to the end market. We have, of course, a very clear segment on the high energy -- high energy prices, where energy was only GBP 40 to GBP 50 per megawatt hour. It was a 2%, 3% of our cost in the Johnson 500, becomes so important that we talk about strategic clients, and they accept and understand temporary support in the energy process and their support and structural support in increasing our prices, reflecting the new host reality.

There's been -- we have to absorb some of it. But I mean, our strategic partners have been streamlined over once in that. So we haven't [indiscernible]

Yes, we have short time and also because there is a time delay between when we get the cutting and when we put the prices street. So at that time they way that headwind of the energy, the headwind of higher energy costs and headwind upon higher dividend prices has hit our margin.

The second one from Steve Kape. What is the headcount in the business, and do you see this changing over the coming year?

I think it's 1,116 dedicated colleagues in our business. We do see growth in certain areas where we will have more employees. We will also have some automation in our facilities to optimize our business and business performance, which will redirect the people more to added value activities in the business. So I see growth following the growth of our business, and I see a slight reduction due to the efficiency we find into our factories.

And actually, Mark, again, and this is a 2-part question. I think Frank, I'll give you part A of the question, and I'll take part B. Okay. Can you talk a little about the competitive landscape? And do you feel growth, looking foward, will be delivered solely organically or through big acquisitions that we consider [indiscernible].

Yes, the competitive landscape is wide. There is a part of very big companies who's supplying our market and there is commencing of a awful a lot of smaller local companies. But where we have positioned Carclo is to become a very agile food-style business for the Life Science, where we have the ability to create global standards, globally across our customers and have a regional platform of manufacturing, which allows us to grow on a wider global scale. So we can go into bigger customers and focusing them on products which we develop centrally and decentrally. And our flexibility and our agility are points which we're winning business on over our competitors.

And on the organic versus acquisitive growth, our focus is organic growth. There are -- within the life sciences sector, it's a market with strong secular growth. We increased people, we have more opportunities to grow than we have capacity to deliver. So there's so much organic growth opportunity that we can deliver on and generate good returns from. That's where our focus will be, and we don't foresee certainly in the near to midterm anything on the acquisition side. And moving to Michael, that will be what is the split of revenue geographically? Have we any plans to expand into new therapy? It's another 2-part question. Maybe David can talk about the first bit and then Frank second.

In terms of the revenue split by geographic locations, so just over half of the sales are made in North America, so GBP 74 million out of that GBP 144 million. And then United Kingdom makes up GBP 43 million with the balance spread across the world, notably China and India. In terms of plants?

We have plants to rise, we see a lot of plants in the APAC region where we are expanding. We're also currently reviewing our U.S. footprint where we are currently setting up a new facility to do assembly or customers or we were expanding also in the U.S.

Next one is from Sandy, which probably won [indiscernible]. Does the company still have this pension scheme. Does the company still have these LDI investments in the pension scheme? I know you mentioned them in your presentation.

Yes, the pension does still employ into LDI investments as a hedge against the liability. The level of hedging has actually been reduced to a 60% hedge. We've also brought in additional liability. What was known as actually matching bonds, giving 9 years of additional liquidity in the scheme. And the trustees do think it's important, but we have that level of hedge between the liabilities and the asset team.

Next one is from Philip, also related to pension. And I think you just in advance answered a bit David, but I'll meet it out. But I think I'd say it's been current. The pension deficits are plummeting, but not for those which have sold their liabilities 100% in exchange for LDIs, and that's a generic savings about the pension market. Question is, what is actual latest suggestion to the deficit in the scheme or is it better or does our contribution to be affected? I think should I pick that and then jump and then help me a bit. The same [indiscernible] has a revaluation -- form of revaluation every 3 years. As David said earlier, the last 1 was March 2021. So we have another 1 in March 2024. Obviously, we did the IAS lead operation of surplus or deficit for our accounts, in terms of technical questions as such. Contributions are determined at that time. So I guess it's a watch list, space because there will be a formal primary valuation as of the 31st of March 2024. At David is correct. And whatever comes out of that is determined to what future contributions will be. There's always a process of discussion between the company and the pension trustees be used to determine both what is affordable, what is a right for the scheme, which one has to remember, it is remuneration for fast employees.

That conclude questions. You're right, thank you very much indeed, and thank you to all the investors for their engagement this afternoon and for their questions. Joe, Frank, David, I know investor feedback will be important to you, and I'll shortly redirect those on the call to give you their thoughts and expectations. But I wonder before doing so, if I may, Frank, just come back to you, just for a few closing comments, and then I'll redirect investors to give you the feedback.

Yes, I just want to thank you all for joining the presentation and also the interaction for the questions. I'm looking forward to see you next time and give an update on our progress.

That's great. Frank, Joe, David, thank you once again for your engagement this afternoon, and for updating investors. The company is asking investors on this call not to close the session as we'll now automatically redirect you to the opportunity to provide your feedback in order that the company can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of Carclo plc, we'd like to thank you for attending today's presentation, and good afternoon to all.