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

Good morning, and welcome to the Carclo plc investor presentation. [Operator Instructions] Before we begin, I'd like to slip the following poll. I now like to hand you over to Jo Otley; Chair. Good morning, Sir.

Good morning, everybody, and welcome. The first thing I want to say really is I'm extremely proud of what our team has achieved in the last year. I know how hard everyone has worked to deliver the results that we've seen today. It's a little over 18 months about 1.5 years ago that Frank took over as CEO, and we implemented a new strategy to first focus on building a strong foundation to the business to drive operational excellence to deliver higher margins and strong cash generation. You'll hear from Frank in a moment about the excellent progress we have made on executing that strategy with continued strong performances from our Aerospace business, our Technical Plastics business in Europe and Asia Pacific, and the turnaround of our U.S. business, which is now well underway. You'll then see when Eric takes you through the financial results, how this is now starting to bear fruit with strong cash generation in the year, improved margins and significantly improved return on capital. When I look forward, we'll continue to strengthen our foundations in truth, the work on operational excellence is never really done. But I'd expect as we move through the year ahead of us, we'll start to bring in a renewed focus on growth and expansion, and Frank will touch on that towards the end of his presentation. With that, I think I'd like to hand over to Frank, who will start by taking you through the highlights of last year.

Thank you, Jo. So welcome everyone to Carclo's FY '24 preliminary results presentation. To date, we will delve into our strategic progress and financial performance over the past year. As Jo alluded to, I'm Frank Doorenbosch CEO, and I'll be guiding you through our journey of transformation. Our agenda today includes the introduction of strategic initiatives, a detailed review of business highlights, our financial update and an outline for future strategy and outlook. We aim to provide you a comprehensive review of our achievements and the roads ahead. On the health and safety, we are working on building a much stronger health and safety culture in the organization. Therefore, demanding reporting any health and safety incidents, which has occurred in the business going up from a paper cut that has resulted in much better insight, but of course, has resulted in a higher total incident ratio of 2.28, up from 147 the year before, but even down from the FY '22. I'm happy to announce that the lost time accident frequency ratio has dropped to 0.3%, which is 20% down on the year before. Success is the dedication of everyone is the fact that we celebrate annual Carclo Safety Week for the second time. And within Carclo, we do try to stay alert, do not get hurt, and this is one of the key pillars of our organization. This year, we saw significant progress on our strategic initiatives with driving improved profitability despite challenging market conditions. I'll fill more on the market positions in the later slides. At constant currency, our overall sales went down by 4.5%, but our overall -- our underlying EBIT went up by 24%, marking the success of our strategic direction. Manufacturing sales declined, which was in line with our deliberate margin over volume strategy and the closure of our short-run business. Our Design & Engineering sales went up driven by our asset revitalization project, and I'm particularly proud of the development of Aerospace, achieving a 40-year record sales. The sales growth in Aerospace and the effect on focusing on offering in our CTP business, combined with operational excellence and rigorous cost management has resulted in an underlying EBIT of GBP 6.6 million, which is constant. Exchange rate is up by 24%. Our return on sales improved to 5% from 4.1% in FY '23, and we made good progress in return on capital employed reaching in FY '24, 13.1%, as we move closer to our target of 25%. So let's look at the performance across our key regions. The current geopolitical situation in China is hurting our global customers we serve in the region. We have moved towards serving the growing local customer base to grow -- to keep our growth on the medium term. Our APAC facilities are leading in material and processing improvements and are currently developing our new standard back-end automation system ready to have a global rollout in the next 12 to 18 months. Our EMEA operations have completed the factory specialization and are now moving into the face of material and processing improvement, working closely with our colleagues in the APAC region. We're sustaining growth with key life science customers, and we're capitalizing on strong demand in the drug delivery systems in the EMEA region. In U.S., where we have reduced by 6.6%, sales declined due to a deliberate curtailing of our unprofitable and the short-run business. Versus -- FY '23, we're also impacted by destocking as COVID-19 PCR test demand reduced. We're currently consolidating our U.S. activities into 1 cost-efficient operation in Pennsylvania. We closed our dairy site in Hampshire as it was predominantly focused on short-term business, and we're currently in the process of transferring capacity from Tucson to complete the centralization of talent and operations in Pennsylvania. The Aerospace division is expanding its precision machining solutions besides benefiting from increased air travel. We were following customers into South Asian markets and investing in new machine technology across all sites to support the growth. So I would like to highlight the progress on the 4 key strategic priorities we discussed last year. We have strengthened our balance sheet through strategic capital investment and rigorous working capital management. As a result, our working capital as a percentage of sales has improved to 7.9%, down from 11% in FY '23, and 22% in FY '22. Our improved EBITDA, combined with the strong cash generation has allowed to lower our net debt-to-EBITDA ratio to 2. We're maximizing asset utilization by harmonizing machines, robotics and processes across all sites, and fostering the one Carclo vision to join and work together in the best global practices. Our revenue to tangible fixed asset has improved 3.3 and the average machine run time is up by 12.5 hours per day. Our focus on prioritizing margin over volume is paying off, and the focus of price has allowed us to improve our contribution margin from 32% in FY '23 to 36% in FY '24. And finally, we're maximizing the value of our global footprint while working together to enhance operations, create dedicated manufacturing locations, boosting efficiency, quality and performance resulting overall in a better customer experience. I am pleased to report that we have made significant progress on factory specialization across all regions. In a challenging market environment, allow me to provide you with an overview, which is characterized by both challenging and opportunities across 4 key areas. In terms of sales, we're navigating a complex landscape. As well the in vitro market has experienced a temporary downturn due to the reduced COVID-19 PCR testing, the long-term growth trajectory remains positive. We are seeing encouraging growth in direct dispensing market driven by increased focus on self-care. Our Aerospace division continues to benefit from the revival of air travel and our strategic regional and product extension. The cost environment change -- remains challenging. We continue to face headwinds in our plastic resin supply chain and steel mills producing aerospace-grade materials are grappling with substantial order backlogs. Operational costs have escalated due to the persistent inflationary pressure, particularly in labor and central services. Regarding polymer and energy, we hope certain general upward pressure on polymer costs, partly due to the partial reversal of crude oil prices reductions seen in FY '23. Energy prices remained elevated, influenced by the ongoing geopolitical tensions. To mitigate these impacts, we're intensifying our focus on reducing scrap, improving our energy-efficient ratios and streamlining processes to offset rising cost. Turning to economic indicators. We are closely monitoring several factors. Geopolitical cancers have created challenges for Western companies operating in China, affecting our market position there. On the interest rates, in the U.K., the U.K. base interest rates have seen a significant shift averaging from 5% in FY '24, up from 2.3% in FY '23, impacting our financial expenses. Reduced discount rates have led to increased pension interest, causing our liability to grow more rapidly than our assets. On a positive note, our Aerospace business has benefited from the rebounding of economic activity and the research of air travel. The multifaceted market dynamics continue to inform our strategic decisions and financial outlook. We remain committed to navigating these challenges while capitalizing on emerging opportunities to deliver sustainable value to all our stakeholders. I will now hand over to Eric, our CFO, to give a more detailed look on our financial performance.

Thank you very much Frank, for that comprehensive introduction and overview to Carclo where we're delivering the strategy in action in [indiscernible]. I'll take you through the key financial numbers. Turning to the key performance indicators. Here, we've set out the half yearly record over the last 4 years for the KPIs. You can see the development in the revenue stream. And as Frank noted, that we saw rolling trailing 12 months indicator that we are down year-on-year on reported numbers by approximately GBP 10 million, GBP 143.4 million versus GBP 132.7 million. However, GBP 4.5 million of that is due to foreign exchange translation that could lower the FY '23 figure. So the actual drop as Frank noted is considerably low 1.5%. If I look at the underlying operating profit, you can see the increase to GBP 6.6 million for full year '24. That compares to GBP 5.9 million on a reported basis or GBP 5.4 million on a constant translation basis. But the GBP 6.6 million is near to the high of GBP 7 million in our full year record. That, in turn, on the bottom left, has driven up the return on sales on a full year basis. You can see now that we're heading back towards the 6% that we saw in full year -- first half year of '22 and up considerably from the first half year in FY '24. On the bottom right, the underlying earnings per share is a more volatile number and what's clearly being impacted heavily by the increase in interest charges principally but we're now back in positive territory at 1.1 pence on an underlying basis. Return to cash generation. This statistic is the trailing 12-month conversion of EBITDA into cash. We can see an extremely strong cash performance during the second half of FY '23 and accelerate through in first half and full year FY '24. That, in turn, has enabled us to reduce the net debt. So we opened in FY '21 at [ GBP 29.5 million ] and first half year, GBP 24.4 million of bank debt, we're down to GBP 18.3 million net bank debt. You can see there's an increase in finance lease process but bear in mind that this is also includes the capitalization of factory rentals under the standard. So whilst it's a bigger number, most of it is already committed rental profit about half of this time. He has also helped us drive return on capital employed up to 13.1% compared to 9.7% last year, and an increasing number through the second half year. And as Frank mentioned that our fixed asset utilization as we controlled capital spending has now moved up to 3.3x, well up from full year '21 at 2.5x. Return to the income statement. Here, you can see that the margin has expanded. If we look at the contribution margin level, gross profit margin level we're up to 36% compared to 34% -- 33% last year. Bear in mind also the impact of foreign exchange, we reported the GBP 0.5 million on foreign exchange translation but there was also GBP 800,000 worth of foreign exchange transaction gain in FY '23 that didn't repeat in FY '24. So our underlying improvement in property is actually stronger when it comes to peers. We have significant exceptional items being expensed here nearly GBP 4.9 million mainly to do with the reorganization and restructuring of the businesses in the U.K. and the U.S. But please note that the cash cost of these exceptionals is actually only GBP 600,000 in the period. Turning to financial income and expense, you can see the significant increase in net finance expense to GBP 5.6 million compared to the prior year, reflecting the higher interest costs that we are suffering in the market generally. As Frank said, going up to 5% base rate, continue 3% despite the fact that we've been paying down debt. If I turn to the second half year, you'll see a substantially increased performance in the second half year, with underlying operating profit of GBP 4.4 million. A lot of the exceptionals kicked in during the second half year on our U.S. restructuring but you can see here our return on sales in the second half year is 6.7%. We're well on track to head towards our goal [indiscernible] 10% before sales and clearly got momentum running here as we start the new year in FY '25. I'll turn to exceptionals charges. Here, you can see the rationalization costs was net GBP 3.4 million, affecting the restructuring to what is going on in the business and in the U.S. the 1,020,000 is to do with patient equalization is required as a result of legal challenges across the whole [indiscernible] in world and that's a noncash item. Debt refinancing costs, we had significant expenditure in FY '23 as we work through a couple of resets the debt financing for this year are really preparing the company to start a process to refinance the business going into FY '24. The other items are really to do with timing up issues on exceptional items in prior years. Turning to Finance expense. Again, you can see here the interest payable on bank loans and overdraft up to [indiscernible] compared to [ GBP 3.6 billion ] and the imputed lease interest cost is also up significantly. But the real impact here, as Frank mentioned, was the imputed interest on this client pension liability -- liabilities increased the imputed interest charge on pensions, which goes up to set by the table below to you can here that's developed compared to last year. So GBP 1.8 million compared to [indiscernible]. Return to the underlying operating profit. Here, you can see on the left-hand side have taken the GBP 500,000 in the exchange translation impacts from prior year number but also noted the GBP 800,000 foreign exchange transaction but didn't repeat in FY '24. So in terms of bridging from 1 year to the next, the base here is really GBP 4.6 million excluding foreign exchange impacts, growing to GBP 6.6 million. We can see the GBP 2.2 million reduction due to the reduced revenues year-on-year but GBP 4.9 million expansion due to the margin expansions that we've been working on including the operating efficiencies in the business. Factory costs pretty much held year-on-year, slight benefit of GBP 100,000. The selling and general administration costs increased by GBP 800,000, and that's primarily looking at expanding our talent pool to drive the business and [indiscernible]. in terms of the pension, this is the report under IAS19 and [indiscernible] the presentation of the [indiscernible] and here, we've seen discount rates moving and the corporate fund rates moving unless that ended up with a net increase in deficit under IAS19. This also includes the past service cost increase of GBP 1 million that I mentioned previously. I think the thing to note with the pension is what really matters are the deficits under the technical provisions and offset by the factories of the pension scheme. And we last reported that it was GBP 82.8 million at the valuations in FY '21. So in March '24, there's another full actuarial valuation through all the indications are that we should see a significant decrease in that 2 technical provisions liability. Financial position is really summary of the balance sheet. And here, you can see our controls over capital expenditure coming through tangible fixed assets of GBP 40.1 million and also includes the impairments that we put through on business sites that we are closing compared to GBP 45.3 million in the prior year. And as you noted at the half year, we saw a considerable reduction in working capital. Year-end, we pretty much held and improved our inventories down to GBP 11.3 million. Our net working capital position is GBP 800,000 net liabilities and that's largely compared to September and the movement on contract assets and liabilities, which are to do [indiscernible] So net working capital is down year-on-year by GBP 5.3 million, improved our working capital ratio to revenues. Net assets employed down from GBP 61.1 million to GBP 50.6 million, helps us drive a return on capital employed from more than 7% to 13.1%. And the cash generation has been implied as I mentioned to reducing net debt, so down from GBP 34.4 million to GBP 29.5 million. That in turn has enabled us to deliver on a much improved net debt to underlying EBITDA ratio, down from 2.5x to 3x. And just note that we have extended our bank facilities to 31st of December '25, consecutive 6 months and shown the support of bank for the company, HSBC. And at the end of March '24, we had GBP 3.2 million undrawn on the revolving credit facility. Return to the cash flow. Here, you can see the improvement in underlying EBITDA but the main feature here is change in working capital over the I referred to. So year-on-year, that's a turnaround benefit of GBP 5.8 million. In terms of the [indiscernible] interest payments going up by GBP 1.2 million and potential contribution has been pretty stable year-on-year ending up with cash from operating activities of GBP 10.4 million compared to GBP 3.8 million for full year '23. So that's a year-on-year improvement of GBP 6.6 million. The net capital expenditures here show the cash purchase of fixed assets but in terms of cash flow purposes, it shows the cash going out to the pension lease payments, so GBP 6.6 million. So we're still investing in the business to a certain extent. That leads us with free cash flow of GBP 3.6 million, a tangible impact flow by GBP 2.4 million, again, a GBP 6 million improvement. If I look at net debt as a bridge, we started at GBP 34.4 million, [ negligible foreign ] exchange impact on the balance sheet. Net debt, operational cash was the main contributor to a reduction in net debt and then enhancement -- expanded by the working capital management improvements. Net CapEx in cash terms of GBP 2.8 million to GBP 600,000, a one-off cash expense on exceptional items and the contributions into the pension fund was due to [ GBP 3.4 million ] and net interest cost going GBP 2.8 million tax payment in line with the prior year but we've reduced our net debt to GBP 29.5 million. So really very strong cash generation significantly reduced the net debt. And to summarize on the effect, this sales leads history of development and improvements in the EBITDA ratio to net debt as [indiscernible] historic number is more like 2.5x to 2.6x. Thank you. With that, I'll hand back to Frank to discuss the strategy.

Thank you, Eric, for that comprehensive financial overview. So let's now shift our focus to how we're leveraging these financial realities to drive our operational excellence and growth initiatives. At Carclo, we empower innovation and sustainability through precision engineering worldwide. On the right side of the slide, you see the point of differentiates how positions ourselves them to the market. Really important going onward, Eric has said, we are supporting our strategy for a relentless focus on margin and cash conversion as cash will staking at Carclo. Our measures are multiple through cost management, operational excellence, managerial volume focus, working capital and investment discipline, allowing us to invest and reduce our debt to improve the financial health of our company even further. On the strategy, our strategy going forward is based on 3 key layers. Layer 1 is the foundation, 2 is the expansion and 3 is proprietary. On foundation, we started with health and safety and building relentlessly to create operational excellence in our operations. By streamlining our procurement process globally, we are now going to achieve greater efficiency and cost effectiveness, allowing us to enhance our competitiveness further. And control and reporting evolution is another key building block of our foundations. We have implemented advanced control systems and comprehensive reporting mechanisms to ensure accurate real-time data tracking and analysis, enabling us to make informed decisions data-driven. Maintaining financial integrity and drive continuous improvement across all assets of our business. On the expansion, with the strength of foundation, we can now move our focus to multifaceted growth. This includes capitalizing on market momentum in the markets we operate, growing our share of wallet with existing customers, acquiring new customers and expanding into new strategic markets. Our Aerospace and Optics businesses are leading this charge based on the fact they run their business on a very solid foundation. On proprietary, we see that the unique proprietary technology, materials and products is the longer vision of Carclo. We are setting up an incubator organization, Carclo life, tech solutions, harnessing and accelerating innovations. Our target is to develop proprietary technologies, materials and products that will drive our future growth and differentiation. So what is robust operational base mean and what do we talk about when we talk about the journey. So let me illuminate you on that. Yes, we have initiated this transformation with factory specialization, I will be talking in our presentation. It's a cornerstone of our strategy and setting new standards in our organization. But that is just the first phase of our journey. It is followed by materials and processes optimization, coupled with back-end automation, our long-term vision is light out manufacturing with interconnecting systems, moving from our current Industry 4.0 connected machines to Industry 5.0 connecting people. This comprehensive approach allows us to work on operational excellence and underpins our commitment for sustainable growth and shareholder value. You hear us say the growth and the status of our different regions in that journey. EMEA and the APAC are leading the pack and moved into material and operation. They have set new standards, how factories should look like, and they are totally focused on getting the value out and the business is run totally data-driven, allowing us to see everything, which is going on in the business and move on continuous improvement. As we said, the U.S. is in finalizing the consolidation in Pennsylvania and is moving there into factory specialization with different allocated cells. They are -- we are completing the process during FY '25, and we see further improvements in our results coming from that project. And the next layer is the multifaceted growth strategy. To date propelling by our Aerospace and Optics businesses going forward is built upon, as I said, the robust operational performance. Our aerospace efficiency is not merely capitalizing on market recovery, diversifying. It is strategically diversifying its offering. We're forging new strategic partnership, levering our competitive edge in short series, high-precision aerospace parts. This focused approach allows us to play to our strength while expanding our market rise by strategic partners, Moreover, we have successfully followed our customers into high-growth regions notably growing in South Asian markets. Our geographic expansion underscores our commitment to servicing our customers wherever their business takes them, leveraging our global footprint. In our Optics business, we're transcending traditional boundaries while maintaining a strong position in headlight aftermarket, we're increasingly moving towards more sophisticated white management solutions. In these innovative applications span, architecture, horticultural and safety lighting, where bespoke light design is paramount. This strategic shift is elevating our business proposition and is attracting a new caliber of clientele. The dialogue sales route of our core eyecare business is gaining tractions. And on the side, we are developing niche product lines for high-end OEMs. These initiatives are opening up fresh revenue streams and reinforcing our market position as we've seen in the growth of these 2 businesses. Let's turn our attention to our expanding sustainability initiatives encapsulating in our Zelda project. The key element is to foster a culture of sustainability throughout Carclo, aligning our people and operations with global environmental targets. We have systematically phased out energy-intensive machinery. We're placing a sharp focus on optimizing resource utilization across materials, energy, water and other key inputs. This approach not only reduces our environmental footprint but also drives our operational efficiencies. Recognizing our position as a substantial electricity customer, we have made strategic decision to transition to renewable energy resources. This initiative is launched in the U.K. with plans for broader implementation across our global operations. We also see that for the fourth year in a row, we have improved our CO2 efficiency to 143. On the EcoVadis Sustainability rating platform, we have advanced from the top 51 of companies last year to the top 35 this year. While this improvement is noteworthy, we acknowledge that there is [indiscernible] room to further improvement, particularly in our procurement practices. Consequently, this has been established as a key objective for our newly formed global procurement team. Our commitment to sustainability is not mainly about compliance. It is a core part of Carclo business strategy. We believe that by prioritizing sustainable practices, we're not only fulfilling our corporate responsibility, but also creating long-term value for our shareholders and stakeholders alike. So to summarize. To encapsulate our progress, we've executed a strategic realignment of our global operations in response to challenging market conditions. This involves carefully orchestrated site closures and asset consolidations, which have markedly enhanced our core competencies and operational efficiencies. Realizing sustainable gains in both production efficiency and profitability through the implementation of cutting-edge machining technologies and sharpened focus on product specialization increase our results. Our financial robustness has notably improved as the evidenced by the enhanced return on capital employed and the underlying earnings before taxes. These metrics underscore the effectiveness of our management strategy and the prudence of our strategic investments. This triad of operational streamlining, efficiency enhancement and financial strengthening are strength form Carclo in a more agile, innovative and financially stand entity. We stand ready to navigate further challenges and seize new opportunities in our revolving market landscape driving sustainable value to our shareholders. On our strategic journey, it's anchored on the 3 fundamentals: Business foundation, expansion and the financial health reinforcement. In our business foundation, we're at the final stages of our U.S. factory specialization projects, a key initiative to centralize and optimize production capabilities. Concurrently, we're progressing to the next echelon of operational excellences through material and process enhancements as has already bear its fruit in the APAC region and starting to bear fruit in the EMEA region. We also executed a strategic sourcing initiatives to bolster supplier relationships, elevate overall business performance but not least to enhance our resilience in our supply chain. In our expansion strategy, we're strategically targeting unserved regions and sectors to improve our market share. This approach is completed by our focused efforts in diversity revenue streams, also addressing new strategic markets. To ensure our financial health, as we said -- as Eric, I said, everybody knows we keep prioritizing market margin and cash flow management. We're also determined to reduce the net debt-to-EBITDA ratio. This all to continue a robust financial stability and prime us to capitalize on further investment opportunities as they arrive. This comprehensive approach underscores our commitment to sustainable growth, long-term value creator for our shareholding, and positioning Carclo to continue success in an increasing competitive global market. Looking ahead, our strategy is clearly defined on both short-term improvement and long-term value creation. In the immediate future, our primary focus remains on strengthening the foundation of our business. We anticipate continued market expansion in FY '25 driven by the benefits of our U.S. manufacturing rationalization and improvement program. This positive trend is expected to extend to FY '26 as we then realize the full year impact of our operational optimization initiatives. These efforts are propelling us towards our strategic goals of achieving our 10% return on sales and 25% return on capital employed. Concurrently, we are maintaining a sharp focus on disciplined cash management, aiming to deliver strong operational cash conversion in FY '25. As we transition to the medium and long-term horizon, our strategy shifts towards an expansion phase. We're poised to drive robust top line growth by capitalizing on structural market growth, increasing share of wallet of existing customers and throughout this growth phase, we will maintain our commitment to capital and operational discipline, ensuring that our expansion translates into strong earnings growth. This bond approach optimizing our current operations while strategically expanding our market's presence underpins our unwavering commitment to create long-term value for all stakeholders. We're confident that this strategy positions Carclo to navigate new team challenges, capitalizing on future opportunities and ultimately, delivering sustainable growth in shareholder value in evolving global market landscape. Thank you. I hand it over to you.

[Operator Instructions] As you can see, we have received a number of questions throughout today's presentation. And Jo, could I please ask you to read out the questions and give responses or appropriate to do so, and I'll pick up on you at the end.

Yes, of course. And just before I go to the first question, could I ask this been one submitted by Simon C. Would you mind, Simon, just resubmitting it just to clarify whether you're wanting to get an explanation of where the ongoing margin expansion is coming from or whether you're interested to find out where we think our medium-term growth is going to come from? I wasn't quite sure from your first question, which was here after second. So if you wouldn't mind just resubmitting while I read out a couple of the other questions, that would be great. I think this one is for you, Frank. You very, very briefly mentioned when you're talking about strategy, something about proprietary products. Are you able to give any additional details on this?

Yes. I think it's a good question. We think proprietary products is something, which will be our long-term growth but this company has a history of promising the world and not being able to deliver. We have said we are going to do work on it. We start to incubate a project and we will talk about the elements before -- when we have something in the marketplace. Also, it doesn't -- wouldn't be good to say what we're doing here because our competition might be listening in and seeing what we're doing. And those 2 elements, we're not able to talk about it further but the business will be set up, and you will be hearing from us very soon.

Thank you. Thank you, Frank. Next one is from Ben. How is the strategy of factory specialization and standardization, improved operational efficiency? And what are the metrics that you're using to measure this improvement?

Yes. What we have done, we have changed long term. We've defined long series of long run factories and short-run factories. Long run factories, we're focusing on the last second of the cycle time getting all the back-end automation out and standardize the processes, while the medium run business are focusing on their agility, reactiveness. et cetera, and I believe if you do something, you focus on something specifically, you will become very good at it. And we are seeing in EMEA where we have the long-run business in our U.K. facility and the medium run in our continental facility in the Czech Republic, and we see that the operational improvements become how do we measure it? We start in the phase of factory specialization with measuring OE, overall equipment efficiency and the amount of run time and the scrap values. And we've got a comprehensive online system ready. We have all the insights and that has helped us that focus helps the performance because people can do one element, focus on that. And our investments to long-run business will be in back-end automation and our investments in medium-run business will be on quick changeovers.

Thank you. Whilst we're Ben, since you've submitted the second question Ben, what percentage of revenue is being invested in research and development? And what are the key areas of focus for R&D? So 2 parts of the question I think. Do we disclose? I don't think if we do.

We don't disclose. No. We do development work rather than research and it's really our engineering assets in our Design & Engineering business that really drive that. And there's also investment in developing new machining techniques in Aerospace.

And of course, the answer that Frank gave when there's a question from [indiscernible] on proprietary technology but the obvious area of R&D for us going forward. Simon, thank you for the clarification. So Simon was after an understanding of, okay, what is the medium-term focus for our revenue growth? I think, again, if I'm getting that wrong, please submit another question. It is a question about our medium-term focus on margins, submit another question, and we'll come back to it. But first of all, Jon where you think revenues -- revenue growth is going to come from in the medium term?

Yes, in the medium term, you have to realize that in the life science business where we operate, you have a long term of validation to do before we can put something to the markets where sometimes projects come in, in the Design & Engineering and then takes a long time before it gets into manufacturing, but we are expecting on the medium term to go our growth rates will lay at least 2x GDP. But if we get the things right in the growth -- multifaceted growth, we'll think about growth rate of around 5% to 8% should be doable growth rate if we're successful. But the point is when does this start, this is very depending on the validation of our customers of the new ideas, the new products and materials.

Thank you. And then there's a more comment from Chris, full disclosure, I will read out the comment. Less than 3 hours to read the results doesn't give me enough time to see if I [indiscernible] question. I think apologies that, Chris, but I think absolutely industry standard, we aim to get presentation out in that sort of 3-hour period after results come out to make sure everyone has quick information from the management team to explain the results and explain what's been going on. So I think you'll find that absolute industry normal and apology to recognize that doesn't give you a lot of time but that's the way the world works. One, just comment on James. The company mentioned a focus on focused innovation incubator engine, which again, there was a question on this earlier. Can you provide any more details on the structure and expected outcomes of this initiative? I think Frank you covered that really in the answer to the question of Amma, but let's give it time a bit more.

Yes, a time a bit more [indiscernible] integrated project. If you're restructuring our business, there's a lot of things carrying on and then some things sometimes do not get progressed rapidly. Innovation and something, which is going to create value in the next 4, 5 years will be lower on the pile. So not to undervalue that development. We're going to create an incubated project. An incubator organization, and I will report to me keeping focus on the innovation and keeping informed. The directions, as we said, manufacturing technologies, so all proprietary unique manufacturing technologies, specific materials development and specific products, mainly focused around sustainability.

Just to clarify, this is a real long-term proposition. So just to make sure everyone understands, I don't expect to be seeing outcomes from that in the next year or 2, it's a much longer term than. Okay. I think that is all of the questions. Will I just wrap up from here?

Jo, Eric, Frank, thank you for answering all those questions you have from investors. And of course, the company can review all questions submitted today and we'll published those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company. Jo, could I please just ask you for a few closing comments.

Yes, of course. First of all, thank you to everyone for attending today. I'm sure you'll agree it's very positive set of results showing the progress that we've made on executing the strategy, stabilizing the business and building the strong foundations for the future. I look forward to the future with optimism. I hope we will have your ongoing support as we continue to deliver on our strategy. Thank you very much.

Jo, Eric, Frank, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete and I'm sure we'll 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 morning to you all.