discoverIE Group plc (DSCV) Earnings Call Transcript & Summary

Well, good morning, ladies and gentlemen, and welcome to the Full Year Results Presentation of discoverIE plc. And as is normal, I'm just going to give a few words of introduction, hopefully not stealing the thunder from Nick and Simon, but perhaps just giving a little bit of context before they give you the detail. And I'm not going to apologize by actually starting by repeating about our strategy because it is a very consistent strategy and I stand up at every results presentation and repeat it because it is worth repeating. Over the years, we've really focused on a number of key elements of the strategy. Firstly, in terms of organic revenue growth. Targeting over the business cycle to actually beat the background market in terms of organic revenue growth and that's really by focusing on target markets and design wins within those target markets. Secondly, strong and improving operating margins. By running our businesses efficiently, we're able to over time along with higher margin acquisitions actually improve our operating margins. Thirdly, we compound the growth by actually having an ongoing program of acquisitions where we're looking for value-creating acquisitions, which really add to the operating margin and give us a good return on investment. And through all of this, a real focus on cash flow to fund the investments and also return on investment to make sure that we're really actually delivering value to shareholders over time. So very consistent and simple strategy and, I hope you agree, successful over the years. If we sort of bring it forward now to this last financial year, it's been a tougher environment to operate in and therefore a real test of that strategy. And if we look at the organic revenue growth, we've had certain areas in terms of our target markets which have grown well; renewables, the medical, the transportation particularly electrical transportation. But the industrial market, which is also a large target market for us, that has been tougher with building up of stock in our customers and that's been a reaction to the supply chain shortages and perhaps we're starting to see that ease a little bit now, but that really has held back the organic revenue growth. But I think what we need to keep in context is that what discoverIE has managed to do over this period is really retain the gains in revenue of the last couple of years. So if you look back at the prior 2 years, revenues have grown at constant exchange rates by almost 50%. So it's been quite an achievement to actually maintain that revenue during the year. And I think again it's always good to take the slightly longer-term picture and Nick has picked out in his commentary that over 7 years, we've seen organic revenue growth at a compound annual growth rate of 7% per annum. That really sort of meets the objectives of beating the background market on organic revenue growth. It's also been a very strong year in terms of operating profits, in terms of operating margin and also cash flow and return on investment. So I'm not going to say any more, Nick and Simon will give the details, but a strong performance in challenging markets. And I think also we see some good evidence of building for the future, particularly in terms of the strong level of design wins, which ultimately work their way through to revenues and profits. But also a building acquisition pipeline and that again contributes to our compounding growth strategy over the years. So with that introduction, I'm going to pass over to Nick to give us a bit more of the detail.

Thanks, Bruce. Good morning, everybody. Thanks for coming. Just a quick run through the highlights and then Simon will go into the financials before we come back to the operating review. So you'll have seen the highlight here. The sales up 1% CER, which is down 1% organically. As Bruce said, that's on the back of sales increase of 48% in the prior 2 years. The point I want to bring out though is that we've delivered very strong organic growth in 3 of our target markets; renewables, transportation and medical. Those markets are up by 12% although albeit offset by the industrials destocking, more of which later. We've kept the operational efficiencies coming. The operating margin is up by 160 basis points and 170 basis points on a CER rate to 13.1%. So we're well on track ahead of our planned margin targets so far and putting us in good position for our longer-term or midterm 15% target. Cash flow up very strongly. Operating cash flow up 22% to GBP 59 million with 103% conversion, really pleased with that. And our underlying EPS up 5%, 10% at CER that would be, which given the extra interest cost and the FX headwinds, we're pleased with that. And of course it's ahead of -- it's a small beat against consensus so we're pleased with that too. Carbon emissions down by 47% in absolute terms. We continue to make really good progress on that. There's a lot going on around the group and we're well on track for our published targets in the next few years. We've been busy on the acquisition front. We've got a team of 5 people now in the M&A group at the center. We made 5 acquisitions for GBP 83 million in the period. We also sold essentially half of the Santon business, which is the solar business. The costs of that which are in these results and the gains, the proceeds from it are in the new year's -- will be in the new year's results. But we're very pleased with the 5 that we've made, they're doing well and integrating as expected. So at this stage in the cycle where revenue has plateaued, what can we do and what can we control? Well, we can focus heavily on our organic performance, which is design wins. So we've got a lot of focus on that and it is building. The bank of design wins is building very, very well indeed very, very strongly and that will set us up as the market turns. And we now have a very strong pipeline of acquisitions in the mix as well. So we feel that we're in good shape for when the sort of the cloud of destocking lifts and confidence starts to sort of return in some areas and we think that we're very well positioned, but more of that later. I'll now hand on to Simon to go through the finances.

Thanks, Nick. Thanks, Bruce. Good morning, everybody. Nick's run through a number of the financial highlights already. So first up for me is revenue. So sales this year, GBP 437 million. That's up 1% at CER and that's a good performance given the tough period of destocking the markets experienced and also against the tough comparators that Bruce mentioned, so sales at 48% in the prior 2 years. So across the 3-year period, that's really good strong through-cycle performance on the sales line. And in terms of organic performance, again the through- cycle performance that we've delivered is 6% CAGR growth over 10 years, it's 7% in the last 7 years. So that's a really good performance. It's minus 1% this year. We've given some breakdown, there will be more from Nick on this later, between the target markets and you can see actually we've got some really strong growth. 12% growth in 3 of our 4 markets, but it's down 19% in the industrial and connectivity market and that's principally just a few of the bigger customers sort have really destocked quite heavily. So the good news is that actually we're seeing a lot of growth in most of our customers and I think that will bode well as we sort of look forward to the next upcycle. So it's very much what we are. We are as a model in normal times with strong growth, in tougher times we're resilient. So next on to profit and margin. Sales have been low, but actually we still delivered some strong growth in margin and in profit on the back of operating efficiencies that Nick's talked about so we've kept -- you can see the profits are up 16% at CER to GBP 57 million. We've got a record operating margin at 13.1%, 13.4% in the second half. And ultimately, as I said, it's down to those operating efficiencies and some acquisitions jointly between the 2. We've kept our costs. The cost base you'll see has been well managed. And there's a number of gross margin initiatives that we've sort of seen through. We transferred production down to lower margin areas such as Mexico, such as Hungary. We've done some production sharing in the U.S. and in the U.K. and the cross-selling within clusters and between clusters is on the growth. So that's all good news. And this all sort of builds into what we've been achieving, the progress we've been achieving. So you can see the margin is up 5.5 percentage points since FY '18 and the actual profits are up 22% CAGR since FY '18. And we're well on track to achieving the 13.5%, you'd say that's in the bag, for the FY '25 and 15% in the medium term. This chart summarize a good summary walk between last year's profit of GBP 51.8 million, this year's profits of GBP 57.2 million. The first 3 bars you can see on the left, that's our organic performance and the real standouts are the operational efficiencies. So GBP 4.9 million extra profit from gross margin. That's over 1% organic improvement in gross margin. Costs organically down 1% so GBP 4 million in total from an organic profit growth. It sits nicely alongside GBP 4 million that we've achieved from acquisitions; 5 acquisitions this year, 1 acquisition last year. And you can see also on that chart, we've absorbed GBP 2.5 million just from a translation hit from stronger sterling, which is good to see we can absorb that type of impact. So I really like this graph, I think we like this graph. It sort of shows what we're about. It shows the model is about organic growth with operating efficiencies with accretive acquisitions on top. Next on to the 2 divisions. Both divisions have had a really strong performance given the tough conditions they've been operating in. As you can see on this chart, it sort of shows performance results against last year at constant exchange rates. Firstly, M&C. Sales are roughly flattish for the year, but again some quite stark differences within the markets. So the U.S. is up very strongly as has been. The Nordics has had good growth, but it's sort of been offset by Asia and also by softness in Germany. I think a lot of companies have seen that. The operating efficiencies, you can see a strong very good gross margin, OpEx down 2%. We had 3 acquisitions into that division during the year and the result being profits up 12% and the operating margin up 1.6 percentage points to 15.3%. A very similar picture from S&C. Sales up 4%, 2% organic. Again this sort of mixed picture by territory; North America strong again, we've had a good performance in the U.K., but sort of offset by weakness in both Asia and in Europe. Similar operating efficiencies to M&C. Again we've had 3 acquisitions in this division, 2 this year and we had the Magnasphere acquisition last year. And the result, 15% growth in operating profits and also a 1.6 percentage points lift in margin to 16.8%. So really good performances. More detail from Nick on the 2 divisions coming up. Next on the PBT and EPS. So this table gives you a walk from the profits of GBP 57.2 million down to the underlying EPS of 36.8p. The big standout is obviously the finance cost. That's up 64% on the back of the rate rises you'll all be familiar with. I put a little chart down there in the lower left hand corner just to remind you of how quickly they went up. I've put them there for the 3 currencies. They're our 3 borrowing currencies that we borrow in typically a third, a third, a third in order to sort of manage our cash flow exposure. So up 64%. So that brings EPS 10% growth in operating profit at a statutory level down to 5% EPS growth. As Nick said, that's 10% actually at a CER basis. But on the back of that, we've also paid a dividend. We've increased the dividend 5%, in line with the EPS. A reminder that, as interest rates do; if and when they do eventually start coming down, we're going to benefit quite nicely. We have a variable debt base and I put a sensitivity there. A 1 percentage point annualized reduction in base rates will increase EPS by about 3%. Just at the bottom there, Nick talked about the disposal of the solar business unit and the way the accounting works is sort of split between 2 periods. So we had GBP 6 million of costs this year, of which GBP 2.4 million are cash costs; but the proceeds are only booked on receipt and that will be next year. So the net proceeds of the overall transaction will be GBP 7 million cash upside, which is great news and you can be sure we will recycle that into acquisitions next year. And if it hadn't been for the cost impact this year, the actual statutory EPS would have been broadly neutral. So the cash flow, Nick and Bruce both touched on the cash flow. We're really pleased with it again. This table at the top, you can see a walk from EBITDA at GBP 66 million down to free cash flow of GBP 37 million. The 2 bars on the left, that's our investment into capital, GBP 2.2 million into working capital. That's actually down GBP 6.6 million since the half year and that, as expected, we talked about we'd be reducing inventory levels and we've done that. In fact stock turns have increased to 3.3x, which is the highest for over 2 years from our perspective. GBP 4.9 million into CapEx investment, that's only 1.1% of sales. And so those 2 combined really illustrate how capital light this model really is. In the middle chart, you can see the growth we're achieving in terms of operating profit, that's up 22%, 12% increase in free cash flow. The difference in the growth rates -- obviously the interest rates can have a big bearing on that, but also tax rates. Tax is up 40% from a cash perspective and they're partly on increased profitability, but also we've utilized a lot of our U.S. tax losses. Conversion rates, Nick talked about that. We've got some excellent conversion rates both over 100%. And if you look at the table at the bottom, it shows our track record of conversion over the last 10 or 11 years and that's averaging around about 100%. So it's very much what we are; it's a capital-light model, it's cash generative, it's great conversion rates, good cash flow. In terms of balance sheet, net debt at the period-end of GBP 104 million, GBP 7 million lower when it was at the half year and we've funded 3 acquisitions in the final quarter. Gearing is at 1.5x. We're comfortable in the range 1.5x to 2x. If we fund up to 2x, that gives us an extra GBP 45 million of funding capacity. And if you add that to say the GBP 30 million we could achieve in funding capacity next year plus the GBP 7 million from recycling the sale of the solar business, that will give around about GBP 80 million to GBP 85 million, which is the sort of level we invested this year. So we're starting to move to that sustainable funding level that we'd like to get to. Next on to ROCE. Ours is a compounding model in terms of ROCE so as the underlying businesses grow, what we call the organic ROCE is going to continue to grow. But that will be tempered as we do acquisitions, which typically we're going to do acquisitions at sub -- our target is 15% overall ROCE, acquisitions are going to typically be below that as an initial ROCE. So if you look at that chart, what you can see, I put the organic number so the 15.9% is growing by 2 percentage points in a year to 17.8%. We've done a record number of acquisitions, GBP 83 million spent. That tempers the ROCE back down to 15.7%, still nicely comfortably above that 15% level. I've also put a data point in there. For acquisitions that are 7 years or older, don't forget all of our businesses have been acquired, there's no sort of old business that's sitting there. We've acquired all our businesses in the last 13 years. Those businesses are achieving a ROCE of 28% and that includes head office cost. So what we would expect to see is about 17.8% organic now through time will grow to that sort of 28%. So you're going to continue to get that. But we will do acquisitions, which I say will temper the ROCE at the newer side. We've also introduced this ROTCE measure so Return on Tangible Capital Employed. So that's sort of ROCE, but without the goodwill and the intangibles and that's coming out at 54%. That's up 6 percentage points in a year, which is a combination of increased profitability and also the inventory reductions that we've made and that again sort of really illustrates how capital light this model is. Next on to just a reminder of our capital allocation policy. It's a simple policy. We invest in organic capital opportunities as they arise. We are going to recycle value of underachieving businesses like solar. We're going to pay a progressive dividend and the rest of our free cash flow we're going to invest in acquisitions. If you look at the chart at the top, we've delivered GBP 215 million of free cash flow in the last 7 years; 25% of that we've returned to shareholders and so the other 75% we're reinvesting into acquisitions or into capital growth assets, CapEx or acquisitions. And overall, we've used GBP 440 million of capital in the last 7 years and you can see the split. Half of that's actually come from our own free cash flow, 1/4 from equity and 1/4 from the balance sheet from debt. So that's quite a nice uniform split. And then just at the bottom, we have a very disciplined approach to balance sheet management. You can see on the chart of gearing ratios and you can see we haven't gone above our 1.5x to 2x in a gearing range that we're comfortable with. There's really no need from our perspective to overstretch the balance sheet. And if you look at the end point, it's just another illustration how quickly we can pay down our debt levels. The 0.7x gearing last year, had we done no acquisitions would have come right down to 0.3x within a year and that's given us capacity to do a record number of acquisitions this year and still be at the lower end of our target range of 1.5x. And finally for me, just a look at the key strategic performance indicators, just it's good. We've been tracking these for 10 years and reporting back. So we set them and as we deliver on them, we up the targets. So just at the top, the KSIs. You can see great performance from operating margin this year and from carbon reductions. We've achieved some growth in terms of building the business outside Europe. We're at 1 percentage point so it's very much driven by organic growth in North America and we've done 2 acquisitions as well in North America. Target markets you'll see are down and that's very much link to the destocking I talked about earlier. But we've got 90% of our design wins are in target markets so you can expect that organically we'll grow back up to certainly where it was in FY '23. But again it can get tempered by acquisitions because typically until we get going, they don't necessarily have all their sales in target markets. If you look at the KPIs, again really strong performance. Cash flow, you can see great performance there. ROCE nicely above our 15% target. EPS, we would have achieved the target had it not been for good old FX and for those high interest rates. And importantly, if you look at the sales picture, that gives you the picture of our sales performance through cycle and you can see that's a really good performance. And so 6% organic growth over 10 years, 7% in the last 7 years. So with that, I'll hand back to Nick for an operational review. Thank you.

Thanks, Simon. Okay. So just a reminder really. I mean the discoverIE model is a model that's built for growth. We focus on high quality growth target markets that account for 3/4 of our sales. The reason for having 4 target markets, as I say I think every year, is because every year 1 of them is down, but 3 of them should be up and that's no different this year. It's just the quantum is a bit more different this year. But by focusing on a portfolio of 4 target areas, we have been able to grow strongly in good times and then we're more resilient in tougher markets and that's certainly the case now and we expect to continue as such. It's worth also emphasizing we're not exposed to highly cyclical markets. So we don't sell into the big consumer markets, we don't sell into the big Tier 1 automotive markets and we don't sell into semiconductor equipment markets; which are all much more cyclical than the areas we focus on. Our margins are robust. Our model is about designing niche custom electronic components and pricing them properly. If we do that, they generate very long-term repeating revenues and if we organize ourselves more efficiently through arranging our acquisitions into clusters, we're able to increase our margins even if we don't increase our pricing at the customers, which we also do. But we have operational efficiencies that by and large increase both our gross and EBIT margins when the business is resilient as I've mentioned. There are 2 things that we do to drive growth. I always mention this. I mentioned it at the beginning and I make no apologies for mentioning it now. On an organic basis, the thing we can do that drives organic growth is get good high quality design wins in high quality customers and we focus an enormous amount of our effort internally on that on an ongoing basis and on building the design pipeline that drives the wins. And secondly, on acquisitions. We're scaling up our acquisitions. As Simon has talked about, we've made 5 acquisitions and 1 disposal. We now have a team of 5 people in the M&A team including 2 people that have an engineering background and they and we are building a strong pipeline of both sort of near term, but also longer-term acquisition opportunities. Those 2 areas of priority are the key to growing this business fundamentally and I feel as though we're in really good shape on both of those. Just to remind at a group level. Those of you who remember us from 10 years ago will remember that most of our revenue 10 years ago came from Central Europe. You can see now that actually that figure is 23% from Central Europe because 55% of our revenue now comes from North America, Nordic and the U.K. markets; which are so I class that as the more resilient European markets plus North America. So our axis is shifting, particularly with a strong North America focus. Going down to the chart at the bottom left of the slide, you can see there the growth profile. The standout figure is the organic growth in North America up 20%. That's a combination of reshoring, freeing up of component supply in particularly 1 of the American businesses leading to a rebound in sales there and also a very strong sort of purchase in America sentiment that isn't talked about as much as it is acted upon in North American customers. Asia there, that minus 1% excludes -- there was 1 large Indian customer -- European customer in India that went through a massive destocking program that I talked about at the half year results. If you exclude that, Asia was down 1% which is basically China and then actually underlying Indian growth which is India is smaller for us, but underlying India growing at 8%. You can see there Germany down 7%. Germany certainly not out of the woods yet. Hopefully we're approaching sort of the bottom in the autumn there and hopefully that will present some opportunities. U.K. doing well proving quite resilient. A lot of export driven business in the U.K. which is helping that. Programs such as many of you will be familiar with the new security scanners going in at the airports where you don't have to take your liquids and your laptops out of your bag. There are 2 primary suppliers of those scanners, there's Smiths and there's Leidos. We're in Leidos. So if you go to City Airport, Manchester, Birmingham and Luton I think it is; they're all Leidos. Heathrow and Gatwick sadly have Smiths equipment in really. That's the group overview. Design wins, a little bit more color on the design wins. The chart at the right here speaks volume. Since COVID, the volume and value of our design wins has doubled really tremendous. That's partly because customers have recovered since the COVID period, but it's also because of the amount of focus we put on it. Every business in our group goes through a quarterly review on design pipelines, design wins and margin pricing and that is leading to some very, very strong design win activity. The key to achieving strong design wins is having a strong opportunity pipeline so we measure the pipeline that we're developing, which now stands at over GBP 1 billion in potential lifetime value with over 85% of that being recurring revenue projects rather than shorter-term projects. And that again is a very strong base from which to reap the design wins. So that has all resulted in design wins being up 23% and 90% of those wins being in our target markets. As Simon mentioned briefly, when we buy a business, typically the proportion of revenue in our target markets is typically a bit less so that's why it has a slightly dilutive effect at a group level. And it typically takes 3 to 4 years to start seeing that -- from the point of an acquisition to start seeing that revenue tilt in the direction of a higher proportion coming from these markets. But that's very much the focus we put and this is a key to driving this business. Acquisitions: well, I mean this is really a representation of the kind of space we're operating in. This is not an exhaustive list, but it's a list of the major areas or some of the major areas that we're operating in and you can see from the shading of the boxes, the degree of position we have in those areas and by and large, our position is very light. Just to recap, the electronic component markets in round numbers is about $900 billion globally. Of that, $600 billion is semiconductors, which we're not in, leaving $300 billion of everything else. Within that $300 billion, there's a corner of that market, which is worth about $20 billion, $30 billion and our $500 million or $600 million of revenue is within that sort of $20 billion to $30 billion. So we've got a small share of a small corner of a massive global market. That's a fantastic place to be. It's a great place for consolidation of these fragmented smaller mostly privately held businesses that we can bring into the group. We bring in high quality businesses and make them better. That's what we try to do arranging them into clusters and so it's a great area for us to operate in. And as a result of that, we have a large fishing ground and there's a lot going on that will drive the growth over the short, medium and long term on that front. So we talk about operating a decentralized business which we do, but that's not to say that we don't make things more efficient. We do it by organizing our businesses into clusters and I'll talk more about that in the next few slides. But we're really now doing 3 things at an operational efficiency -- with an operational efficiency focus. Firstly, we do consolidate sites. When we buy a business, we don't generally buy a business with the sole intention of consolidating a site. We buy a business with the objective of making it better and more efficient and an output of that might be our ability to consolidate or organize some of our sites accordingly. So we've done quite a bit of that in the U.S. over the last few years. In our largest cluster, we've consolidated 3 North American sites into 1 for example, we've expanded our Mexican capacity and so on. In the U.K. and Europe, we've both increased our size and scope by investing in new buildings. In Germany of all places, earlier this year we opened a larger new facility for a business that we bought back in October 2011. When we bought the business, it was a bit like operating above a garage. It's now got its own stand-alone purpose-built facility and it's a terrific business growing very well and we're investing in it and we'll continue to invest in it. We've consolidated high cost sites. So there's lots that we can do by having cluster arrangements of technologies and engineering and production capabilities. We often and increasingly find the opportunity to move stuff around and by doing that, we can often increase the margins that we're operating at without having to even in some cases change anything that we do with the customer. So it's invisible to the customer in some cases, which is obviously great for us. And then in Asia, we've increased capacity. India, we've actually paused what we're doing. We've increased part of our capacity, but paused a larger part. China, we're moving to a larger facility and we've recently enlarged Thailand. We optimize production within region. I talked at the half year about moving a bunch of production from the U.S. into Mexico, a bunch of production from the U.K. into Hungary and also the U.S. in some places. And so that again just makes us more efficient, but that comes through both in gross margin and OpEx. And I've also now added disposals on. So we've recently announced the disposal of the solar business because it's becoming a less attractive place for us as a business to operate in. We sold the Custom Supply business back in FY '22. So as we're growing, the sort of the portfolio management aspect is starting to come into play although I should say we don't have anything else that we're planning to get rid of just yet. I'm always told that I've got to present this so I'm going to present this. This is our track record of consistently improving performance. You can see on the left hand line, the orange bar is the ongoing continuing revenue and the blue bar is the discontinued business that was essentially the distribution business that we have since sold off in 2022. So you can see that the ongoing revenue has almost doubled in the design and manufacturing space in that period up almost 100%. The operating EBIT, there are 3 bars on there. You can see the orange bar is the EBIT of the operating businesses, the blue part section is the distribution disposed off part and the white part is the central office, the central costs. Again you can see there the orange, the ongoing continuing operating EBIT has more than doubled since 2018 or FY'18. At the same time the EBIT margin has increased from 7.5% to 13.1% and 13.4% in the second half of this year just gone. And the underlying earnings per share up from just shy of 15p to almost 37p. So strong and continuing growth and we expect to continue improving those figures as we go forward from here. So a little bit more about the organic sales. We've touched on it, 7% CAGR over 7 years. We are very much wedded to this grow in strong times, plateau in softer conditions and then grow again. And that orange line on that line chart shows what we've done since 2017 and we're obviously in that plateau period at the moment. And you can see on the bottom left hand side of this chart, our industrial markets are down 19%. So that's basically a lot of the industrial customers were down, but the majority of it was a handful of customers, 9 customers, all big names. I understand that Siemens have put out some public comment on the destocking that they've been going through and we have certainly seen that. Siemens are a large customer of ours and certainly their industrial business has been destocking. So that's quite a significant movement. So the question is when will that end? I think we are starting to see light at the end of the tunnel there. I think there's a little bit more time to go, but hopefully we're approaching the end of that destocking phase. But then look at the other 3 target markets; medical up 5%, renewables up 15% and transport up 22%. So very strong double-digit growth in aggregate there from just under half of our revenue base. And then the other markets up about 3%. So excluding industrial, 71% of our group was up by 9% organically. That's a very, very strong performance and we are certainly pleased with that and looking forward to the stabilization of the industrial market. A little bit on the divisions. So both divisions interestingly have a very similar sales profile; 55% of revenue comes from North America, Nordic and U.K. and the rest of it comes principally from Western Europe and Asia. On the bottom right, you can see how the revenue profile has grown. We're acquiring in both divisions and we've now got to the stage where in the Magnetics & Controls division, we have 2 clusters plus 3 other businesses across 16 countries. Our largest cluster is Noratel, which is the magnetics business that we bought in 2014 and then the other cluster is our embedded control business unit. Geographically you can see North America growing very strongly; Asia down, that minus 15% includes the large Indian customer destocking. But I think the main point I want to make is there are 2 clusters in this division and you'll see there are 4 clusters in the next division. Both clusters have a very similar performance overall you could say, very similar geographic profile and growth profile as well. So Sensing & Connectivity, there's the 55% in North America, Nordic and U.K. again. As I mentioned, we're making acquisitions in both divisions so we've done 10 in this area in the last 5 years. And here we have 4 clusters, of which the largest is the sensor cluster, which was started with an acquisition in February 2017, the Variohm Business Group, which now comprises 6 bolt-on acquisitions to make our second largest cluster. Again you can see the way the revenue is built. You can see the revenue growth profile over there again driven largely by North America. So 2 very similar operating divisions. So the order book. So the lead times have come right in as availability more widely across the industry has improved and customers have reduced their order windows. We need around about 3 months lead time for our planning and production. It changes a bit by business, but broadly it's 3 months and we currently have about a 4.5 month order book. So having a 4 or so months order book is perfectly fine for us and that certainly is what we've got and that's down from 7 months in September '22. So our order book are firm orders. They're not cancelable because it's custom product. Customers place an order, they've got to take it and they've got to pay for it before they get the next delivery really. So it's a very firm order book. We allow a little bit of rescheduling, but only a little. So the order book's come off its peak with order rates plateauing and book-to-bill ratios improving currently. I think we'll see this order book stabilize from here on and return to a sort of more normal level of operations in that regard. And finally, the outlook. So we've got a strong bank of design wins driving our organic growth, we've got a strong pipeline of acquisition opportunities. So we believe that we are continuing to do the right things to get the growth going again when the fog of destocking is cleared. We've got a lot of work still going on on the operational efficiencies and improvement areas, which will drive continued margin expansion and the acquisitions will further enhance that. So we think we're doing the right things and we're in good shape for continued positive development. Our FY '25 outlook is unchanged. Q1 is trading in line with expectations although it's worth noting that the comparators year-on-year will be tough. But the H1 sales we're expecting to be ahead sequentially. So obviously that's a good thing. And the other comment, the order book that I just referred to, that is pointing to a normal H1, H2 profile. So we're typically about 48/52 H1/H2 loaded and we think that, that is what's going to happen this year and so our expectations are set accordingly. So that concludes our presentation. Thank you for your attention. And I think now we go over to Q&A, don't we?