discoverIE Group plc (DSCV) Earnings Call Transcript & Summary

Good afternoon, everybody. Great to see you all here. Thank you for coming. Welcome to the discoverIE Capital Markets Day. Some of you may remember the last one we had, which was 6 years ago. Well, a lot's changed in 6 years, and we're going to show you some of that today. Not least of which we were a partial distribution and manufacturing business then. We were a much lower-margin business, and we were a much smaller business, both financially and in terms of scale and operations. And what we're going to show you today is how that's all changed. And more importantly, where we think it's going to go from here. So we've got quite a busy afternoon. There's quite a lot to pack in, there are -- we've got three sections essentially. The -- I'll start it off with a welcome strategy and take you through some of the operational growth initiatives that we're working on. Simon will then take on -- take over and going to cash flow and capital allocation, after which Jeremy Morcom, who heads up all our M&A activity will take you through that aspect of our work. That will then follow a break, after which we'll get -- come back and get straight into operations. So starting with Paul Hill, who's our Group Commercial Director for the Sensing and Connectivity division, and then Martin Pangels, who is responsible for the Magnetics and Controls division. And what you'll see there is how we built those divisions up over the last 10 years, how we gain efficiencies, develop clusters, collaborations and things like that. That will then lead us on to the collaboration section headed by Neale Sutton, our Group Development Director, where you'll see some real examples, real live examples of what we do when we talk about into group collaboration. And then at that point, we'll just wrap up and then move on through to the other end of this lovely building, which is where we've got a product exhibition. We've just come off a 2-day conference with all of our management around the world. 100 of our managers from 21 countries actually, they like the United Nations, but 100 of our managers from around the world. There are 50 of them remaining here today. They are the business heads plus some other engineers and sort of divisional heads, who will demonstrate the products, the businesses, examples of collaboration and how it all works. That will then finish with a Q&A back in the -- or in the exhibition hall followed by drinks reception. And so I wish you all very welcome to join and ask as many questions of us here and the operational management. So let's start with the strategy. So I'm often asked, but just tell me a little bit about discoverIE, what is it in a nutshell? Well in a nutshell, the essence of discoverIE, as many of you will know, is that we are focused entirely on essential unique customer electronics. We currently work across four main technology areas, sensors, connectivity, magnetics and controls. Our value proposition is one of delivering unique, customized, high value-add, technically demanding products to customers to enable them to develop unique product solutions for themselves. So the products that we create are unique and essential, they're necessary for our customers to innovate in their markets, but they're a very small proportion of their system cost. By getting ourselves designed into those customer applications, we focus particularly on, and I'll talk more about it later, generating -- getting product specked into customers where it will generate long-term multiyear repeating revenue. And when we talk about multiyear, we talk about typically 5, 7 years and maybe even more. We have a fantastic customer base. We sell to large established international customers in the main. This is just a snapshot of a few of them that I'm sure you'll know of all of them, Leidos, Abbott Labs, Vestas, Train, ABB and many other well-known names. But importantly, our customer concentration overall is actually quite modest. Our top 10 customers account for 25% of our revenue. And that's really quite deliberate. We don't want to be overly dependent wherever possible on any one area or technology. So we bought and started the designer manufacturing division that is now the entirety of discoverIE back in 2011 with our first acquisition, Hectronic, which is they're here today and the -- the managers that are here today are the managers from which we bought the business back in 2011. And at around that time, we set up -- we established a set of metrics that work to drive the development of our group. And whilst the target levels have changed in some cases over the years, the basic metrics are very similar and remain as pretty much as valid today as they always have done. The first one is organic sales growth. We've always targeted GDP growth well ahead -- sorry, organic growth well ahead of GDP through the cycle. And we've always said it's through cycle. And the bottom line here is the results over the last 10 years or so. So over the last 10 years, we've delivered 6% compound annual growth rate. And we're going to show today how we think we will continue to do that and maybe even more over the next 5-plus years ahead. Operating margin, well, originally, this was a loss-making business. We're now up at about 13% and a bit percent. Our target is 15%. We've increased it by over 800 basis points through a combination of both organic and acquisitive growth. And again, we'll show you later a bit of detail on the constituents that have made up that increment -- that increase. EPS growth, we've always targeted, and we still target EPS growth of more than 10% per annum. We've achieved 19% per annum over the last 10 years. We won't achieve it this year, as I'm sure all the analysts amongst you will know, but we will get back to it. Cash conversion, super important. Over 85% of pre- and post-tax profits, we've averaged over 100%. We have a great model that is CapEx light, it's R&D light, it's a very efficient model, and we fully intend that to continue. ROCE. Well, there are a number of ways of looking at ROCE. I mean, we're an acquisitive group. We're ramping up the scale of the acquisitions. And obviously, every acquisition dilutes the short-term ROCE. But overall, our target is to be ahead of 15%. We current in the last year, we reported 15.7%. But if we took out the acquisitions that we made in the last year, our organic ROCE would be 18%. So for -- important for us is, of course, the overall ROCE, we want to be ahead of 15 -- the sort of 15% to 17% range. But the ROCE of the businesses that we've already bought, we expect those to continue to grow steadily over time. And again, we're going to show you some examples in the operational section after the break of exactly that. And then the most recent addition to the target is carbon reduction. In 2019, we introduced this or established this as a metric. Our plan is to get to net zero by calendar year '30 on Scope 1 and Scope 2 and net zero for Scope 3 by 2040. We're making great progress so far. We're down -- we've reduced carbon emissions by almost 50% since calendar year '21, which is -- that's a true like-for-like measure, including the add back of the acquisitions, so the emissions of acquisitions. So they are the metrics that we run the group by, and we'll continue to run the group by. And we think they work for us because over the last -- the first 15 years, should we say, we've achieved a doubling of the size of the group every 5 years. In fact, over that period, our earnings per share have grown by 19% CAGR. So obviously, that's more than doubling every 5 years. But of course, it's easier when we're small. So as we've got bigger, it's a bigger task to do, but we're geared up for that. We've geared up and we are continuing to gear up our resources to do that. And indeed, over the last 5 years, again, we've almost doubled earnings over that period, increasing by 14% CAGR. Our ambition has always been to double every 5 years. We always run with a 5-year plan that we review every year, and that remains as valid today as it always has been. And the fundamentals behind that are we're growing a group with structurally improved operating margins that is highly cash generative and that is growing above the market rate. And the reason we think we can do that is because we have a very clear strategy. It's a simple strategy, but they say the best strategies are the simple ones, and this is certainly that. It's consistent. We've applied it for many years now, and it works. We're focused on generating high-quality growth -- sorry, growth in high-quality growth markets. And the way we do that is by achieving or getting our products specked into high-quality market -- customers in high-quality markets that will then generate growth, and I'll give some examples of exactly what we mean by that. And if we continue to do that consistently as we have been, it will generate organic growth that's well ahead of GDP. And then on top of that, we want to acquire more businesses that have that discoverIE DNA, but with higher margins, whether that's a platform acquisition or bolt-on acquisitions that will enable us to grow in other areas. What we're finding now we've got to a certain size and scale is that we're able to generate more and more efficiencies by working together, doing things better as a group, sharing what we've got, making some of our operations more efficient. And it's really in the last sort of year or 2, it's really started to come through in the results. And we expect that, that will only continue to grow as we have -- now have a pretty well-established global footprint. It will generate efficiencies in margin. It's already generating efficiencies in margin, growth -- whether that's growth and EBIT margins and also in cash flow and working capital management and the like. And finally, we'll reach net zero. And the reason we have confidence in this is because we're very fortunate to be underpinned by a very, very powerful value proposition. We make very innovative products. Some of the stuff we do is just fantastic, and you're going to see a whole bunch of examples this afternoon from all the various businesses. We are driven by technical complexity and differentiation that creates real value for customers. We're getting better and better at pricing according to the value that we create, which is why you've seen the -- partly why you've seen the margins increase. And we operate in a very fragmented market, a small part of a very large market that's highly fragmented, which gives us great opportunity for acquisition and consolidation. But strategies aren't static. They have to evolve and develop as we grow and evolve as well and as the world develops and changes. And so we've got five areas that we're going to talk a bit more about today, which are -- and some of them are already coming through, some of them we've been at for a little while now, and a couple of them, one of them is brand new, we're announcing today, and another one is fairly new. The first one is increasing product innovation and differentiation. Many of you would have seen some of the simpler products still custom and adding a lot of value that we make that are still very valid for us and will continue to be very valid, because they're very cash generative. But what we're also doing at the same time is increasing the level of product innovation and product differentiation. So you'll have seen maybe in some of our other presentations, we've talked about moving up the value chain in the engineering path that we operate in within our -- with our customers. We do that because greater product innovation and differentiation generates higher gross margins, at least the higher EBIT margins. It's just a better place to be. So we're doing more of that. We've now made approaching 30 acquisitions over the last 11 and 12 years. And as we've done that, we need to organize those businesses into ways, both that gives us management scale, but also enables them to operate together and get benefits of operating together without being subsumed or consolidated and sort of damaging the infrastructure of the businesses we've built. And we do that through the cluster management arrangement. So we build -- we arrange these businesses in clusters, and we find that, that is one very, very effective. We find that the businesses respond tremendously well to it. And so we're now at the stage, we're actually across the group, we've got six clusters of varying sizes, scales and development. They're all slightly different, but they all are very true to that concept. And new for today is we're announcing our fifth target market. So for the last 10 years, I've been asked, will you have another target market? And I've always said, well, we will, we won't rule it out, but we don't need it yet. We're now at the point where we've identified a fifth target market. So we're announcing that today. I won't say any more about it now, but I'll come on to it in a few slides time. Any prices, anyone guess, maybe [indiscernible] sweepstakes out.

We probably look forward to do that.

Oh Yes, you're looking in the pack, no cheating. The other one that's relatively new is this operational integration. We're going to talk a bit more about this as well as we go through the operational section. But there's a lot that we're doing by having manufacturing footprint in all the main economies of the world for our kind of business. We find there's a lot that we can gain by arranging what we've got more effectively and sharing it with other businesses. It sounds simple, and some of it is quite simple and [indiscernible] quite straightforward at least, but it generates tremendous efficiencies. And we can -- we -- I kind of feel as though we've reached a bit of a tipping point with it, where it's really starting to kick in now. And certainly, in the recent results, that's been the case, and there are certainly more examples that you'll see today, which reinforce that. And then acquisitions. We've been increasing the rate and size of acquisitions over the last few years. Jeremy, he will talk more about that. But over the last year alone, we made five acquisitions for GBP 88 million consideration. It was a very, very busy year. And that is entirely in line with our expectations as to how we're going to develop it. The DNA and the characteristics of all the businesses we buy are very similar. And it's interesting with the management conference that we've just had in the last couple of days, one of the things that came out very strongly is that despite the differences in some of the products that we -- the opcos, the businesses have, the characteristics of the businesses and the people within them are actually quite similar. So that's how our strategy is evolving. That's what's making us fit for the future. We feel we're ready, we're there. We've got what we need to be successful. And perhaps to underpin that, we've got a fantastic market space that we operate in. It's a GBP 30 billion market. We've got a 2% market share of it. It's got very long-term growth characteristics; big international innovative customers can't do what they need to do without products from us. So we're absolutely convinced as we've always been, by the way, that we're in the right market. So if you bring all that together, this is the growth plan that we set out for ourselves, and we're sharing it here with you today. So these at the top left box here, these are the medium-range targets that we have published for many -- our various targets for many years. And then what we've got down here at the bottom left is three scenarios of organic growth rate over the next 5 years. And three scenarios of acquisition spend. So in the last 5 years, we've spent GBP 300 million on acquisitions, and we've grown at 7% organically. So if we grow at about that same rate and we spend at about the same rate as we've been spending before, our earnings per share will be -- almost pretty much doubled. If we scale back the acquisition spend, to GBP 200 million and organic growth slows, then we're still going to grow a healthy 60%. If we continue to scale up the acquisitions and we end up with this much lauded but not often acknowledged possibility of a good strong economic recovery at the end of next year, then you never know, we may get closer to the 8% and organic growth and an increase of perhaps 130% in earnings. Now who knows what the economy will do because that will modulate effectively how where we end up on that chart. But I think the point to make very strongly is we've got a very strong acquisition pipeline. We've got a very strong organic growth initiatives underway and somewhere in that matrix, we're going to come out with a pretty decent growth figure. So how do we grow? So we're going to break down today into these sections and talk a little bit about and provide a little bit more color on the kind of activities and initiatives that we undertake to generate the growth that we're all wanting to achieve. I'll start off running through product innovation. We'll then go into a bit on commercial focus, and then into efficiencies. We'll later come back to collaboration, Neale Sutton, our Group Development Director, will talk about the collaboration initiatives. And you'll also hear from Jeremy on the acquisition activities. And it's by us focusing and delivering on each of these initiatives that will generate the growth that will deliver the midterm plan. So product innovation, I'm not going to go into the detail here of the products, but I want to show two examples of the kind of things we're now doing and the level of innovation that's involved. This is a -- this product is in the exhibition hall as is the next one on the next slide, and usually you'll see them later. And this is a very fancy trackball and touch pad interface. It's all combined into one unit. It has all kinds of super unique features that no one else does. It's completely unique. It's completely customizable by customers. It's very easy to use. It's just one plug-in point of interface, which is one of its unique features. And it's cheaper than a customer can build it independently and discreetly. So for us, we get a higher ASP unit selling price unit with much higher gross margins, the customer gets a lower price, easier-to-use unit. We developed it initially for the medical market. We're also now rolling it out into maritime, industrial and visual editing. It's important also to mention that this is all within our 2% of R&D -- 2% of revenue R&D spend. And that's because we're using commercially it's viable, established technologies and applying them in a way that's different. And I'd also like to point out that all of our R&D is expensed not capitalized. The second example is Sens-Tech. So you may have unknowingly experienced the benefit of this product. If any of you have been through airport scanners recently, and you haven't had to take your liquids and your laptops out of your bag, there's a 50% chance that it was due to the Sens-Tech product here. There are two suppliers of this technology in the world, and we're one of them. So if you go through a LiDAR scanner at City Airport, many of you have been through City Airport, it's got our kit in it. And the kit is very high-speed, high-bandwidth x-ray data processing. It enables us to analyze x-rays in much greater resolution, which is why you can find impurities and even liquids. We developed it for the airport security market originally, we're now also selling a variant of this into the food processing market. Paul will talk later about applications in areas such as waste management, and there are other applications, EV, electric vehicle recycling and other potential applications that we're working on. The beauty for us of this is these are complex boards, there are lots of them in the system. They have very high unit selling prices. The benefits for the customer is that they get technology that barely no one else in the world can provide. And the reason we're able to do this is because we have very high capability engineers that have a very, very deep knowledge of the -- in this case, the processing technology required. And they also have a very strong understanding of the customer's application needs. And it's marrying those two things that enables us and our engineers to come up with solutions that customers will pay for. The second area I'm going to cover is commercial focus, right. So growth sort of pairing it back to its sort of simplest format. Growth is about two things, winning new business and selling into customers that are going to grow and do well, pull through as we call it. So let's start with winning new business. So I always say, and some of you may remember me saying this in the past. But I always say, if we could only do one thing, the one thing we would do as a business is we would focus on generating design wins because that's the one thing that creates the business that is going to enable you to grow and flourish. And in an engineering-led business sales model as we have, there's no product that you can just sell off the page. You've got to work with engineer -- with customers to generate that demand. And this chart just shows that the more opportunities or design wins that we register the more revenue we get. Yes, it cycles a bit. This was the COVID dip when -- post-COVID dip customers couldn't get all the products. And we're seeing the opposite of that now where designs are very, very strong, but there's a bit of destocking going on. But fundamentally, if you don't have the design wins, you're not going to generate the revenue. So we focus very intently on generating high-quality design wins and the right type of customers and the right type of markets that will generate the growth. All of our -- each of our opcos are targeted with generating 10% per annum organic growth through cycle. And they'll probably tell you more about that today. I don't know they're not scripted. So you'll hear it. Hopefully, they'll be our message. But you'll hear the details from them. As I say, yes, the revenue in the short-term is moderated or modulated by the stocking up, the destocking cycles, the pricing and inflationary effects and some other sort of attrition effect. But fundamentally, the benefit of our model is that we can kind of semi quantify what our growth is going to be because we can see the value of the projects we're winning. And the value of the pipeline that we've got in development. And the value of the pipeline that we've got in development is something we track very, very closely. So last year, we had -- and it's the similar figure now. We had a design pipeline with an estimated project value of GBP 1.3 billion. So when we -- just to sort of a little point of detail, when we register a design win, so we registered GBP 337 million of design wins last year, which was up 23% on the prior year. That figure, the GBP 337 million it comes off the GBP 1.3 billion. Overall, at a group level, our design win rate is about 1:1. We win one, we lose one. It varies quite a lot by business, our higher engineering content. So such as the examples I've given you, we have a very, very high typically 80% win rate on some of the less differentiated products that have less engineering requirement, they have a lower win rate for -- sort of various understandable reasons, but principally often you don't need to have -- you can register an opportunity even if you're not quite as sure of its prospects. So you -- so when you win GBP 337 million, you've got taken the GBP 700 million coming off the pipeline. So behind this, we measure with our engineers on an engineer-by-engineer basis around the group, the level of new opportunities that they're generating. So they need to be generating GBP 700 million of new opportunities in a year at the moment, and they're doing it. And the design activity rate in our customers is by a very wide margin, the highest we've ever had so far, partly because we're better at it, but also because there's a lot of stuff going on. We talked -- we talk about, and we'll talk about later, I'm sure, about the industrial, the big industrial customers and their destocking. But we've also got, at the same time, in those very same customers, the highest level of project design activity that we've ever had with them and that they've ever had with us. And so we're very confident, therefore, that -- yes, they've got some of the destocking issues that they need to deal with currently, but we know that they're going to come back because they've got the project activity and the market position to enable them to do so. Just a little bit about the market in which we operate. So the global electronics market, $900 billion in round numbers, 2/3 of that is the semiconductor market. The other $300 billion of that market is the electron -- the non-semiconductor electronic components market, which is dominated by a very wide range of largely standard products. We operate in a nice little corner of that market that we estimate to be around about GBP 30 billion, which is where customers need the kind of thing, the airport scanner application needs or the maritime controller application needs, electronics that they just can't get anywhere else. They need some of that -- they need someone to make that kind of stuff that they just can't do. And that market is probably growing about 5% to 6% a year, but there are faster and slower growing bits within that. But overall, it's about 5% or 6%. We focus on what we think are the better parts of that market and that will generate that better growth. And it's dominated by many much smaller companies, small to medium-sized companies. They're our acquisition targets. So it's a great place to bring those businesses together -- a great opportunity to bring those businesses together. And I won't go through this in too much detail, but it's all kind of about three big mega trends, electrification, digitalization and decarbonization. You'll have heard this many times before, I'm sure. And they're great fundamental drivers, and we focus on getting access to applications with those drivers behind them in these areas over here, health care, industrial, a bit of networking and telecom, which is really our connectivity piece and transport, which here comes within industrial. But more importantly than that, we avoid consumer electronics and Tier 1 automotive because for many reasons, not least of which the commercial reasons, the commercial terms are really not suitable for the kind of business that we have and want to be. So we focus on our four target markets that you'll all know well. I'm sure, renewable energy, which is principally wind for us. Transportation with rail, marine, aviation and specialist vehicles, medical equipment, such as MRI scanners, defibrillators. You'll see some great defibrillator example through in the exhibition hall. Industrial and connectivity, which is automation and comms at the highest level. And then now we're also adding in security as our new target market. Access controls, detection systems, surveillance systems, aeronautics, space and a little bit of defense. And we think that those are the markets that will drive -- the proven markets, the first four, and we think the fifth one has many similar characteristics to create the growth we require. So you'll see in the exhibition hall examples for -- when we talk about access control, magnetic switch, we have a very, very specific magnetics. Basically, it's a fancy magnetic switch in an enclosed chamber, that is tamperproof, and it's used for access critical locations. So we have, for example, we've just -- very recent just last week won a huge design win for a very large data center manufacturer not for their access to the data -- not for access to the data center, but for access to each of the individual cabinets. And there are thousands and thousands of those cabinets being rolled out. X-ray detection and the second example for airport security and other security applications, that's the Sens-Tech example actually that I showed you earlier. We have a power over an Ethernet product that's used in rail systems for public security and transportation security applications. We have a business in Denmark that some of you may have been to Flux that makes satellite -- make components for satellite communication. Every ease for satellite has our product in them. And then I also talked a little bit about defense. So we have a little bit of defense revenue, and that's coming into scope now in the target market. The security sector, as we make it up and define it now makes up about 9% of group sales. Much of that -- a little over half of that comes out of our other sector and the other half come from reclassification out of, for example, the transportation sector. And it's grown from 2% in FY -- 4 years ago in FY '21. Of that, defense accounts for 2% of the group sales and it's up from 0.5% 4 years ago. It's passive defense, 95% of it, something like that, is passive defense, and that's really mainly where our focus -- that's where -- mainly where our focus is. So it's like comp communications, simulators, there's naval ship electrification, things like that and the kind of applications that we're involved with. So we believe that by continuing that focus, that organic design win-led focus, we will continue to generate the 6% or 7% compound annual growth rate that we have in the past. We expect that, that will come back over the next 12, 18, 24 months to some good levels of strong growth and perhaps even take us closer to the 10% figure. I'll now come on to efficiencies. There are really three ways we generate our efficiencies, pricing better, manufacturing operations and operating leverage. So pricing for us is all about making sure that we're pricing for the value that we create rather than for the cost to create. And we've got a lot better at this over the years. This is something that's been going on now for 10 years, really thinking about how we can better determine the value of the opportunity that we're working on for the customer. And that helps us to think about and distinguish and be more choosy about the kind of revenue that we choose to engage with. We don't want to be engaging with revenue opportunities where the customer really doesn't see the value that we think they should see. So we get better at pricing, our products become more differentiated. We can be more innovative. We get better at pricing it. And that leads to better margins over time. We never rip the customer off. We're very fair in the way we do it, but sometimes we just got to be a little bit fairer to ourselves, and that's what we've been doing. We can do it because of the product differentiation, the high barriers to entry to operate in the kind of product areas that we operate in. It's difficult to do the stuff we do, and most people don't do it. And increasingly, we have actually quite a good market position. If you're an international customer, like some of the names I mentioned earlier, you may have engineering locations in multiple regions and countries of the world. You may have and probably will have various production locations around the world. You'll nowadays tend to have regional variants of the product that you make around the world. When you're choosing this highly engineered product you need a supplier that not only can make this and design this stuff for you, but that can make it and consistently supply it to you around the world on a consistent basis. And there are very few that can do that. So that's really building on that position and making sure that the customers really understand that is a very important part of what we do. Manufacturing efficiencies. So these are efficiencies that come through in both gross margin and OpEx. But just to summarize, the headline of this is that over the last 8-plus years, we have generated GBP 6.3 million a year of operational efficiencies by arranging what we do more efficiently. And I have to say, actually, when we went back and looked at this and pulled the numbers up, we were -- ourselves pleasantly surprised when you talk to it'll back -- [indiscernible] up going back that time -- all that time, just how much it actually generates cumulatively. It comes from things like reducing the number of sites in similar locations. So we rationalized a number of years ago, the number of sites in the Nordic region. Over the last 2 to 3 years, we've done the same in the States. We've rationalized a number of operations into one U.S and one -- and a couple of Mexican sites. We've moved stuff -- we've moved stuff around geographies, we've introduced production sharing, where we may share just the production of one part with another factory in another location. We've moved production from higher labor cost regions to lower labor cost regions. You'll see one of the businesses. This business here in Hungary is Limitor that we bought a few years ago. The production facility there, they're now manufacturing. I think it is for four of our other businesses around the group, absolutely first-class, world-class manufacturing impacts in Hungary. We're moving production closer to customers, which is an important benefit that lead the localization of customer activity, particularly in the Americas, is an important differentiator these days. And then we're getting volume efficiencies by structuring our operational capacity more effectively. So we do all that, but I have to say, at the same time, we're very focused on preserving the decentralized nature of the business. And hopefully, as you go around, you'll hear from the [ OpCo ] heads that they don't feel anything, but benefit from this kind of activity. They don't lose the operational entrepreneurial ability and agility that they need and want to be successful, but they do get the benefit of these kind of efficiencies in their production environment. And then, of course, we add to that just the -- by structuring our operations more efficiently and in the way we invest both in OpEx and CapEx, we can kind of put more volume through the pipe, where we have been putting more volume through the pipe as we grow, and we just get an operating leverage benefit as it falls through. So as we look back to 2018, and our operating margin has gone from 6% to 13% of that 3 percentage points increase, half of it has come from organic growth, from manufacturing efficiencies, from operating leverage and from better pricing. The other half of it has come from 2.5% from acquisitions, but -- I wonder how many of you have thought if we'd asked how much of our margin increment has come from acquisitions versus organic development. I suspect a fair number of you would have guessed that more of it might have come from acquisitions than organic. Well, actually, it hasn't, it's come -- it's the other way around, and we're very, very pleased with that, obviously. But we've also benefited from making disposals. We've made two disposals, the distribution business 2.5 years ago, Acal BFi, that was a lower-margin business. And then more recently, we've disposed of the solar business because the commercial terms for that were no longer attractive to us. So add it all up, we get there, we've doubled the operating margins through those kind of initiatives. And if we keep doing things like that, we'll keep developing our operating margins as we have done over the last 10 years. This chart shows the targets that we've set in red at each stage and the operating margin as it was at the time. So we had a 5% target by FY '16 back in 2014 when we had a 3% margin, we got to 5.7%. But before that, the year before, we launched a new target because we could see that was going to be achieved, but we virtually achieved it there. So we launched a 7% target and so on and off we went. So we've done it six times now. We've set, met, actually exceeded and then set a new higher target for margin. So we're currently a little over 13%. We've got a target of 15% by FY '28. And importantly for us is the -- we believe that the initiatives that we've got underway, both organically and acquisitively, as you'll see from Jeremy later, will generate the growth to take us not only to 15%, but beyond. So 15%, as I'm sure you'll all ask is, is that the end or is that just the latest target? The answer is, it's the latest target. And we've deliberately not quantified the next number because I know that's all we're right about. So we don't know what that is yet, but there will be a new target when we get to 15%. So that concludes my part of the slide of the presentation. I'll now hand over to Simon, who will take you through the cash flow and capital investment.

Great. Well, Thanks, Nick. Hi, everyone. Welcome. I'm going to try talking from the other side of the stage, see what it's like over this side, give you a different view. Yes, for my part, I'm going to cover cash flow, capital allocation and capital returns. Firstly, as cash -- we've got strong -- it's a sort of a reminder, we've got strong cash generation, strong cash conversion and a really robust balance sheet. And you'll see that from our history that we have, we've got a history of strong -- long history of strong profit growth, strong cash generation. And you can see that on the chart on the right-hand side, that chart, see operating cash flow and free cash flow over the last 10 years. And for the last -- over 10 years, we've had 24% CAGR growth in operating cash flow. And in the last 5 years, that's about 16%. So that's a really, really good cash generation. If you look at the chart underneath, that's operating cash flow as a percentage of operating profit. And again, you can see that's really consistent, strong conversion rates. It's averaging over 100% across that 10-year period. And the reason it is so high is because we have a very -- it's a very capital-light model, as you probably know. But on average, we've previously talked about 2% CapEx rate, it's actually averaging around about 1.5% over the last 7 years, and our working capital average is around 16% across the same period. But all of that free cash flow we've generated in that 7-year period, it's GBP 215 million, and we've been able to reinvest that into our growth strategy. I'll show you some of the capital investments that we've made with that cash and obviously Jeremy will talk about the M&A side. And on the left, we do have a very disciplined approach in terms of funding. That's a chart of gearing ratios over the last -- well, since we started borrowing money. And you can see, we all set ourselves, as you probably know, it's a target range, 1.5 to 2x, we feel comfortable within that range. But you can see we've never actually exceeded that range. There's no need for us to overextend our balance sheet. And actually, if you look at the right side, the right bar, it sort of illustrates the speed of our cash generation, the strength of our cash generation. Last year, have we not done any acquisitions, our gearing would have come down from 0.7 to 0.3. And that allowed us, as Nick talked about, we've -- we had a record investment in acquisitions. We did five acquisitions last year for GBP 88 million, and we still stayed at the bottom end of our gearing ratio, and that gives us ample capacity and we'll generate more cash this year. Next, on to -- is a reminder of our capital allocation. You've probably sort of seen this slide before. But it's a simple policy. We invest in organic capital projects as they arise, as they come to us. And those typically have a payback of around 2 to 4 years. We will release funds from underperforming businesses from time to time. We did the solar business, Nick mentioned that last year. We pay a progressive dividend. And the rest of the free cash flow, we're investing that into acquisitions. And so you can see on the chart on the right, GBP 250 million of free cash flow. 75% of that's gone into growth investments, CapEx and acquisitions and 25% back to dividends. But just to harp back to the acquisition side. We talked about the payback on organic CapEx, the sort of multiples we're playing on is bolt-ons. It's 4 to 8x the typical multiples we're playing, 9 to 12x for platforms. There's more information on that in Jeremy's pack. So overall, GBP 440 million of capital in the last 7 years, half of that has come from our free cash flow, quarter each debt, quarter from equity. That's a very sort of balanced funding approach. I talked about the reason why we are -- we capitalize giving that strong conversion rates, working capital and CapEx. This deals with working capital. And you can see the chart on the right, we have a really tight ship in terms of managing working capital. It averages as I said, 16% over that last 7-year period, and we're targeting a level going forward in the 15% to 17% range. And as you -- if you look at the chart, organic sales growth does have a factor on that. The four 2 -- the two 14% levels you see in 2021, they're the really strong organic growth periods. Likewise, we all know about the -- the global supply chain shortages that companies like us of across the globe. And that's obviously had an impact, pushing it up to 19%. But most -- a lot of our inventories now work through our system. A little bit more to come. Just in terms of the KPIs. Stock turns, yes, stock turns are at good level. They're over 3x, and that's because the type of product we make, it's a -- it's bespoke product. And therefore, it's made to order, it's committed inventory. So we don't have lots and lots of excess inventory. And we do continue to focus on efficiencies. There's a continual focus on lean manufacture across the businesses. The localization, that's -- there's a big move across the industry and certainly us, we've done a lot of localization, and that's sort of reducing -- that's reducing goods in transit. In terms of debtor days, our debtor days of 50. That's pretty good. If you look at the overall the market, on the commodity side, you're looking at well over 100 days, debtor days. And the reason is of that sort of level is because we are making -- I'd say we're making a bespoke product. The customer can't get it anywhere else. It's an essential piece of their overall equipment. And if you don't pay, we can -- we would hold back, but they're high-quality customers when they do pay, and they typically do pay on time. If you look at acquisitions. Obviously, we do lots of acquisitions, and we look each time and we do achieve lots of efficiencies from those acquisitions. We've got a small working capital team at head office, and they work with the acquisitions in order to deliver best practice efficiencies. There's a few examples there. Noratel obviously stands out. It's a 10% improvement in working capital since we owned it. We paid GBP 70 million for it. So that's equivalent to -- it was doing GBP 70 million of sales of the outset. So it's about a GBP 7 million saving we've made. So 10% of the actual price -- the original price, we save purely from good working capital efficiencies. Working capital is really -- it's a -- for us, it's a really important metric. So if you talk to the business, they're all bonused on improving working capital as well as obviously delivering decent profitability and so we at head office. The other side of the low cap -- 1.5%, that's the chart of our CapEx over the last 7 years, 1.5%. And that's, that's covering -- half of that is roughly going to maintenance and half of it is going into capacity enhancements, whether its facility fit outs, whether it's equipment, new equipment, IT equipment, ESG, it sort of all covers that. And again, the reason why it is so capitalized is because of the nature of -- again, I keep -- it's bespoke products. So it's high mix, it's sort of low volume. There's a much more manual element of the production or manual and semi-automated. We don't have big sort of automated projects facilities like you would obviously see on the consumer end. Our facility costs are pretty cheap. I've got some examples of that coming up. And likewise, production -- the production equipment, we -- it's really solid stuff, and it lasts and last. And actually, Nick and I were sort of visiting our U.K. site a couple of months ago and came across a fully depreciated lave that had been made from the 1930s, if you remember. And you're particularly excited about that. I must have -- I must have -- well, you took a photograph. I'd say we're -- you know we're a decentralized business. So there's not one big IT project pushed out across the group. It's IT, small individual -- systems that work for individual businesses. And that means lower complexity, lower costs. And just a reminder, a lot of those costs, a lot of it is cloud-based these days. Those costs are now being expensed since 1921, 2021 even. And that's part of the reason you can see for the drop in rates is because we're expensing a lot of the IT upgrades we've been making. Okay. Just a few examples. I said, I'll give a few examples of CapEx, internal organic growth capital projects. Obviously, Jeremy will talk about the acquisitions. First, investing in new capacity. MTC is a super example for us. We acquired the business back in 2011. You see a little picture of it there. It was a workshop sitting above that garage. It's really quite a small place. Three years later, they've relocated, fitted out a new facility, expanded it 4 years later. And only last year, they moved into a brand-new fit-for-purpose, carbon-neutral headquarters. Nick has taken rather a liking to it -- a bit of a shine to it. So I think you're quite fancy moving over. It's a super place. And as you look at the results that, that one business alone has achieved. It's had a tenfold increase in capacity as it's shown, and that's delivered 17% and we aimed it for 13 years, 17% CAGR growth in sales, 19% CAGR growth in profit, seeing a 24% operating margin and it's got ROCE and return on investment well over 100%. Not much to -- lots to like about that business. Two more examples here. Firstly, sort of investing in new capabilities. Cursor is an example here. And they -- we're building sort of smaller sort of -- they have PCB assemblies, but they were looking to sort of -- having to sort of outsource quite a lot of the bigger stuff. And they've invested GBP 0.5 million in a new facility. It's just sort of a lot of you might have been to see Cursor. So it's a facility that's sort of just near their main head office. And that's just allowing them to do some really -- and you'll see some examples, there's a really good project. They're working with Sens-Tech. That's in the exhibition. So it's really exciting what they've been able to do. So it's both helping them improve their own margins and it's working with -- it's progressively working with businesses to help build their boards and bring it all in-house. So the overall payback of that facility it's only 3 years. So that's a really exciting development. Do talk to those guys when you see them. The second example is investment in integration and Nick touched on this, Noratel with Hobart in 2019. And since 2021, we've been moving production. Noratel had a very expensive Californian site, Hobart have an Arizona site and they've progressively been moved into -- and we've expanded Hobart's Mexican facility in Nogales. Overall, GBP 700,000 spend, really quick 2-year payback. And that, if you look at -- I think Martin's got a slide on Noratel, but it explains part of the reason why that business has gone from 10% operating margin when we acquired it to 16% now. They've done a lot of -- lot of integration work. Two more examples here. Systems. I said, we don't have this one big decentralized system, Variohm is an example. Variohm had four separate sort of U.K. businesses all on different types of systems, which made it very complicated to run. We've invested GBP 600,000 and sort of rolled that out progressively. So you learn as you go across those four businesses. And that gives really quick payback. The sort of operational and financial visibility they get is pretty quick. Obviously, the speed of reporting is better. And that they're now looking at sort of rolling that type of system now across their other cluster companies at some point. The final one here as an example is the investment in sustainability. Nick talked about sustainability projects. Noratel is part of that is our own sort of endeavors to reduce carbon emissions. Noratel have invested GBP 700,000, Sri Lanka is our biggest plant, has four buildings, GBP 700,000 to put solar panels on all of those buildings. And it's a got a 5.5 paybacks. You're still making operational sense to do that. And clearly, it's reducing -- significantly reducing its carbon footprint and ours because it's the biggest site. And that sort of leads on to just our reduction project [indiscernible], solar panels is one of the things we're doing, there is other sort of investments overall. We've invested GBP 1.2 million in reducing emissions to date. That will also include heat pumps and the like. Our plan, as you may recall, is to reduce carbon emissions by 65% by FY '25. We're 2 years in, it's down by 47%, and we're looking to be net 0 for 2030 and Scope 3 by 2040. So lots of great progress there. And we're getting great payback on that investment. It's 2- to 6-year payback. As I said, it makes financial sense as well as environmental sense. Just on the right -- just a good point to note is that us -- our targets are SBTi aligned. Lots of supplies -- lots of customers now are have SBTi targets. And they need to sort of get supply from businesses that are SBTi align like ourselves. And therefore, that's creating some form of competitive barrier, again for suppliers that not as environmentally friendly as us. It's 18% at the moment, and that amount, you can imagine, is only going to go up. So a really nice additional benefit you're getting from the work we're doing on carbon emissions. And finally, just in terms of returns. We've got a compounding model. We -- the businesses that we buy, their returns are growing as the profits are growing, but we're doing acquisitions as well. So the acquisitions will partially reduce the overall return that the group sees. So what I put here is a chart that says, well, if you look at the right-hand bar, up to FY '18, all the acquisitions we made in FY '18 in that year were delivering a ROCE of 13.7%. By '21, those same businesses were doing 20% and this -- and the year that's just gone the same businesses then are now doing 29%. A similar picture in '21, 14.5% for all of those businesses at that point in time, moving up to 24% last year. The overall and I talked about, we did a record number of acquisitions, but the overall ROCE at FY '24, we reported was just under 16%. And so that organically will grow -- over time will grow to over 30%. We will do other acquisitions, but that organic chunk will just continue to grow. So that's very much part of what we are. So it's -- you know we've got a track record of strong profitability, of strong cash flow and organic returns. And that is going to -- we expect that to continue in that vein, particularly as markets pick up. We've got a fantastic acquisition pipeline, which Jeremy is now going to talk to. So with that, I will pass to Jeremy to talk M&A.

Thank you very much, Simon. Good afternoon, everybody. I'm Jeremy Morcom. I'm Group Head of Corporate Development. So I look after the whole acquisition program for discoverIE. And I've been doing that since 2017. And in this session, what I want to do is to give you a feel for what it is we're looking for, how we approach and selecting acquisitions, how we do deals, how are we -- topics like how do we price them, how do we integrate them and how do we drive value from those acquisitions. And then also to look ahead of what you can expect in terms of our future activity for the acquisition program. But before we get into that, I'd like to just quickly recap on our historic acquisition activity. You all know that discoverIE is a highly acquisitive company. And over the last -- well, since 2011 since we embarked upon the design and manufacturing strategy, we've invested GBP 465 million in 27 acquisitions. So there's quite a lot of deals that we have done. And as -- and if the point didn't come across earlier in the presentations, the entire discoverIE group that you see today is actually a result of the acquisition program. Beyond the headlines, what the underlying story is that we've been using acquisitions as a tool to drive our strategy. So we've been internationalizing our business, particularly in North America. That's been a key goal for us. When I first joined discoverIE, we had about at 6% to 7% of sales in North America. That essentially has doubled through the acquisition program and through organic growth. And that's a feature that will continue, by the way. We've also laid the foundations for multiple clusters. So we're up to six clusters now have different sizes, different stages of development. But in particular, and I'll talk about this a little bit later, we've radically grown in our sensing cluster from a foundation acquisition in 2018. And along the way, we have done 13 synergistic bolt-ons. So these are bolt-ons to existing businesses where we can drive a lot of synergies, drive a lot of value for shareholders. In terms of the profile of the acquisitions, if this point of work, here we go. So by geographic region, it's pretty much just an even split between North America and Europe, which is what you'd expect given the type of businesses that we're active in and the markets that we're addressing. And then in terms of the investment by division, this is in -- again, in the last 5 years, you'll see that there's been -- it's a broadly even split, but a little bit more has been spent in sensing and connectivity reflecting the buildup of our sensing cluster. So if we just look at the activity pattern, if you take an average annual spend on acquisitions across the whole of the period that I've just been talking about, it's about GBP 35 million per annum over that 13-year period. In the last 5 years, you'll see that we've done 60% of the acquisitions in the last 5 years. So the average annual spend has increased to somewhere between GBP 55 million and GBP 60 million in that time period. And as Simon and Nick have highlighted, the -- in the last year, we did five acquisitions and we spent GBP 88 million. So the picture is very much of a steady ramp-up and buildup of our acquisition activity, and that is absolutely the plan for the future, as Nick had indicated, to continue our growth and to achieve our overall group goals. So let's look for a second about what it is that we're looking for and how we approach finding and selecting potential acquisitions. And I think this is actually a really important slide because it goes to the foundations in my mind of the success of our acquisition program in a variety of dimensions. So when we're looking at a business, and considering it as a potential acquisition. The question that we start with in our minds, first and foremost is -- is this a discoverIE business? Is it -- does it have that central DNA, which has underpinned all of our businesses and our growth and our success in recent years. So that's the first question. And why am I stressing that? Why is that important? Well, two reasons, really. The first is that we're not imposing -- with the focus on the DNA, we're not limiting in any way, the scope in terms of products and technologies. We're not constraining ourselves. So actually, what that means is that we are able to consider and look at acquisitions across the whole of the $30 billion differentiated electronic component space that Nick and Simon have been talking about. If we had a strategy that was constrained as to specific products and technologies, we would not be able to draw the net as widely as we do. The other important aspect of DNA, first and foremost, is that it means that we're buying businesses that we know and understand well. They're our type of businesses. And the important benefits of that is that it reduces the risk on acquisitions, and it also enables us to speed to -- it to integrate acquisitions with speed and with certainty. So it reduces the risk of the acquisition program. It increases the scope. And it also enables us to bring businesses into the group and be successful with them quickly. So assuming your business passes the test, if you like, as to having that essential DNA. What else is it that we are looking for. When it comes to bolt-ons, obviously, the key thing that we want to see is that there's attractive synergy potential. In the case of larger businesses, so new potential platforms, what we want to see is that there's attractive new capabilities and technologies and products that are coming into the group, something new in essence. And importantly, for a platform, one of the key things that I look at is, is this a business that has good scope for further follow-on acquisitions, i.e., can we continue to build out and rollout our acquisition-led model with that platform. And then just finally to wrap up on this. We have -- as you understand, know well, we have an autonomous operating model. So we need to have strong committed management teams in the businesses that we're bringing into the group who can thrive in this entrepreneurial, highly autonomous type of environment. Other aspects that we look for are, obviously, additional penetration and scope and scale in target markets and of course, strong financial returns and growth potential. One of the key messages that I would like to convey is that we are a very disciplined acquirer when it comes to pricing and valuation. We routinely walk away from transactions, when we don't believe that we can actually generate the sort of returns that we're looking for because the pricing of the transaction doesn't suit us. So how do we go about that? Well, we look at -- every deal is different, and we look at a multiple of parameters to try and decide what is the right valuation for the businesses that we're looking at. And that starts with -- sorry, I press the wrong button there. It starts with the growth rate, the revenue picture. Has the business grown consistently, or has it been a weak performer in difficult times? Do we think that it's got strong growth potential going forward? Does it have that exposure in the target markets? So the first question we're really looking at is what is the revenue potential in the business. And obviously, higher growth rates enable us to look at potentially higher valuations. The next thing we look at is the level of the margin, the EBIT margin in the business, and higher-margin businesses are obviously a better thing, and we can potentially pay more for businesses where they have a higher level of margin. There is also an important element of scale effects for smaller businesses, there are often opportunities to acquire those at very attractive multiples, partly because it tends to be a little bit less competitive for smaller businesses. But also -- well, it's just -- it's an established fact, if you like, that the smaller business is you can generally have an opportunity to buy it at the lower multiple. In terms of synergies in the valuation, that is another factor that we look at. We don't make a practice of sharing synergies, but on occasion, when we see there are strong synergies and it gives us more confidence as to what we can do with the business, what we can develop with the business over time. Then again, that potentially goes into the whole valuation mix, the whole equation that we're looking at. What does that mean in practice? Well, you can see on the top right chart here that actually we paid a wide variety of multiples, EBIT multiples this chart is showing for the acquisitions that we've done, everything down from 3 to 5x, up to double digits. So we really are pricing according to the quality and the strength and the opportunity that we see in the acquisitions. But I will hasten to add that in 3/4 of the deals that we've done, the multiple that we've paid has been 9x or less. So we're always looking to get the best possible deal that we can. Related to this topic then is the fact that as part of our conscious strategy to drive up the margins across the group. We have been focusing since 2018, 2019 on acquiring higher-margin businesses. So you can see here, back in this time period here, we're at a sort of level around there. And since FY '18, FY '19, we've been acquiring businesses at significantly higher EBIT percentages. I'll hasten to add that, that doesn't necessarily mean we've been paying higher prices for these businesses. We've been able to require some -- to my point earlier, we've been able to acquire some smaller businesses with very, very high -- very high margins at attractive multiples. So don't necessarily assume that because we've been focusing on higher-margin businesses that we've been paying higher multiples in recent times. So in terms of our integration approach, what discoverIE is looking to do is to acquire good businesses that have the essential DNA and have that fit with us and strong management teams. And then to build upon the foundations that strong platform that we're buying. So we don't make a practice of restructuring, reorganizing businesses, applying radical surgery to them to change them into something different. We want to buy businesses that fit our model and that have got good management and that we can then invest in and develop for the long-term and build upon the platform that we're buying. So what that means is that we are going to -- we retain the brand, the operations and the marketplace identity. We retain the people. And we're looking to continue to preserve the entrepreneurial spirit of the businesses that we acquire. That is -- it may seem not a very significant sort of point. But actually, when it comes to buying a lot of owner-managed businesses, which is something that we do on a regular basis, this is an -- this integration model is an important differentiator for us relative to some competitors in the market, and it enables us to buy businesses. Do you think it -- if you put yourself in the shoes of an owner manager, who's perhaps put 20 or 30 years of their lives, into building a business, you actually want to see -- you're proud of what you've achieved, and you want to see that, that is going to be built upon and preserved, and that is what we do. You don't want to see that it disappears, the brand name disappears or that the operations are closed down and is essentially restructured. As also part of our integration, we will typically be upgrading the reporting controls and governance arrangements to meet the -- our requirements as a public company. And it's also important to touch upon what we don't do. So we don't do -- we don't buy businesses that need fixing or radical surgery or significant improvement because we're not -- that's not part of our model, and we're not set up to do that. One of the things we do is work with the management of businesses that we're acquiring to develop a growth plan and a business plan for the acquisition typically over a 3-year period. And what we look to reinforce that with attractive financial incentives, so that if the business performs according to the plan that where we've laid out then everybody benefits from that, that we obviously get the growth and we get the improved margins, and then the owners of the business or the managers share in the financial rewards of that. And that is typically done via a 3-year earn-out program. So what underpins all of this is that we can integrate businesses quickly and we can do it at low risk and our focus is very much on delivering growth and synergies through the integration approach. In terms of how we add value, I'll cover this relatively quickly because you're going to hear from Martin and Paul, a lot of specifics around how certain businesses -- and examples around how certain businesses have been integrated. But when we acquired the business, if you think about what I've just been talking about, that we're buying businesses that we understand, we're bringing -- we're putting them into a global electronics group, which brings a lot of additional opportunities. There's a lot of opportunities and a lot of levers that we can pull to drive value with our acquisitions, and they come under three headings in general terms. So first, you've got commercial synergies up here. So this is introducing businesses to acquire businesses to our customer base, so cross-selling. It's actually internationalizing businesses. A lot of -- in a lot of cases, if we're buying an owner-managed business, they might be operating successfully on a regional basis or maybe even a national basis, but they won't typically -- or typically be operating on an international basis. As a global group, we can help them grow, and we can help them accelerate their penetration into other geographic markets in a way that they just couldn't do on their own. So that's a really important synergy. Other things that we can do on the commercial synergies are working together to pull our technical expertise and our products to develop new solutions, combined solutions, and you'll hear more about that in a few minutes after the break, about how that works in practice. One of the other things that we do is invest in those businesses that we acquire. So that could be additional production capacity. It could be just scaling up the business in general. It could be upgrading the systems; it could be improving their net 0. So obviously, as a big company relative to most of the acquisitions we're acquiring, we can -- we have the capital and the resources to help them develop and invest. And then finally, on operational improvements, and Nick and Simon have touched on a number of these by using our established best practices around working capital discipline and general operations, best practice sharing and improved business processes, we can help businesses do more with what they've got and become more efficient. So overall, it's all about finding ways, and every acquisition is different. Not all of these things will apply on every acquisition. But generally speaking, there's a portfolio of things that we do to drive growth and to drive efficiency through our acquisition program, and you'll hear more examples of that later on in the session. So here's an example of how all of that works in practice. This is talking about the Variohm Group. So we acquired the Variohm business originally in 2018. Since then, we have made five bolt-on acquisitions. And what we've been doing with that is bringing in additional high margin, differentiated businesses on top of the existing center foundation. We penetrated North America. When we bought Variohm, it had no presence at all in North America, but there's a huge market opportunity out there. So we've acquired businesses to take them into North America and also to give them new product capabilities. So if you start with a customer relationship that's founded on one particular sensor type, you then create the opportunity through acquisitions to offer them additional sensor types, you can create really nice cross-selling and additional growth opportunities. And the net result of all of that in the case of Variohm is that we have more than tripled the revenues of that business since we acquired it in 2018. And the EBIT has increased more than -- by a factor of more than 5x. It's really a fantastic story, and I'm particularly proud of it because it's a result of a very close collaboration between the management team at Variohm and myself and my team, to really look at where are the opportunities for building a bigger, broader, higher-quality sensor platform, and it really has been effective and generated some real value there. You might think that having spent all of that money on 27 acquisitions that we might be running out of room for maneuver in the acquisition program and really nothing could be further from the truth. What this slide is showing on the left-hand side chart is a simplified version of how we track a number of different product and technology areas within the four elements within our divisions. And then that's mapped across geographic territories, United Kingdom, Rest of Europe, North America and Asia. So the white space, as it suggests, that is where we have nothing. Where it's a lighter color, that's where we have something, where we -- it's a darker color, that's where we have significant presence. So obvious point, most of that chart is actually white space and represents areas where we could do further acquisitions. And even the areas where we've got the orange presence, I would say we're really at the early stages of building out our presence there. There's a lot more to do. So -- and to bring it back to what we said earlier, we only have -- we estimate a roughly 2% market share in that $30 billion addressable market. So you shouldn't be surprised that most of this is white space, and there's a huge amount to go for. And just to give you one example, I was recently at Embedded World, which is an industry show covering the embedded computing and industrial computing spaces. It's an enormous show. I literally need to spend days and days to go around it and the exhibitor list is over 400 companies in just the tiny little area that's highlighted here. We have two companies there, the show had more than 400 companies, many of which were very, very exciting what's going on. There really is a huge amount to go for, and that's just one tiny element of this overall chart. So I hope you get the picture. And to further reinforce the growth opportunity, what we've been doing in the last 2 or 3 years, in particular, is to really work on our acquisition pipeline on our idea generation process and also working with our operating businesses to help them develop their strategic plans, their acquisition criteria and start developing ideas of their own. As part of that, my team has grown. It's now five people, three of those have been hired in the last 24 months. and it's really beginning to gain traction and to bear fruit. And so we now have -- we're now tracking over 250 targets, which we believe from the work that we've done are meet our acquisition criteria, have the DNA characteristics and are synergistic in one or more ways with one of our operating businesses. Obviously, those are in various different stages of development, but it just illustrates the vast space that we have available and the room to continue to drive the acquisition program as we move forward. So just to round up here where we're at and where we're going in terms of the acquisition program. We are a disciplined, experienced acquirer. We know what we're doing. I think, I hope and believe that we're good at it. We've got a consistent strategy that has delivered proven results and growth and margin expansion for us. And all of that is going to continue. The acquisition activity has ramped up significantly in the last 3 years. The -- that will continue. I've resourced the team to actually accelerate that process. And we have this huge, huge room for maneuver to grow in these $30 billion specialized electronic components space that we're addressing. You'll see that we'll continue the internationalization process. We're still underweight in the U.S.A. There's still a lot more we can do. And we'll be focusing very, very closely on building those strategic -- strategically significant and synergistic clusters. Because that's where things really start to work together. Our model really starts to gain traction and drive growth and margin improvement. And last but not least, we will remain a disciplined acquirer, both in terms of what we're looking at and in terms of the pricing and valuation that we apply to companies. So with that, thank you very much, indeed. I believe we're now moving to a break.

Yes. Thanks, Jeremy. So that's a complete Part 1. We're now have a 20-minute break back here at 2:40 complete the Part 2. You only got an hour of slides in Part 2. So bear with it, and then you're into the exhibition for an hour and 25. So you can do some walking and some talking in. So yes, back here at 2:40, please. [Break]

Right. I think we're ready to start. So welcome up from the break, everybody. My name is Paul Hill. I'm the Group Commercial Director of Sense and Connectivity. I've been with the business about 3 years. During earlier rehearsal, we -- no don't laugh, honestly, we rehearsed this. One of my colleagues very helpfully said that you couldn't understand my Northern accent and he thought I was a bit low on Zing. So I am from Yorkshire. If you can't quite understand the dialogue, then my German colleagues can sort of translate for you later. And as auction in go, this is Zing way I am get to the maximum. I'm going to cover three elements. I'm going to give you an introduction and I'll give you sense and connectivity division. Then I'm going to talk through in a little bit more detail about the clustering approach. And then finally, for me, the interesting bit, I'm going to talk you through three applications and product areas that I think capture the sort of the essence of what discoverIE is about. So just starting with an overview of the division, quite dramatic growth from the very early days in FY '14 when we were tiny, just GBP 10 million of revenue to FY '24, GBP 172 million of revenue. We've been growing at a compound annual growth rate of 33% during that period. Operating profit has gone up by nearly 30% per year. 15 acquisitions, of which 2/3 are in the last 5 years. We've built four now -- four technology clusters. I will talk in a little bit more detail about the sensing cluster because that's the most mature of the clusters. And I think also, particularly, we've put a lot of effort into growing the business in North America. So we've now got a good footprint there. There is a slight decline in Asia and the rest of the world but that has largely been driven by the solar market that we have already spoken about that we divest. What I think is -- what I think about this, I don't so much think about what's happened. I'm thinking about the future. And I think what we've got here is a fantastic platform to take the business forward. Just talking through a little bit more detail about how the division is organized. So you've heard quite a lot about Variohm and you're going to hear a little bit more about Variohm. So I'll come back to that later. Starting on the bottom right, we have our fiber comms cluster, which is managed by our management team at Foss in Norway just outside Oslo. That's -- they've got another sister company in a subsidiary in Slovakia. And the -- recently, we acquired a small business in Oslo, which provides some product extension for them. The story of Foss really over the last 5 years has been about product extension. If you looked at the business 5 years ago, you had found a business that was largely focused on one market sector, which is fiber to the premises. And now over 75% of the opportunities that they're working on are in the broader industrial sector and in the security sector. So that's really been a case of product expansion. Contour started and CTT, we brought those together. They've got certain similarities in the business. So we brought those business together. They provide cables, connectors, CCTV, custom solutions and we've brought those together to really drive some operational and commercial synergies, which we're now starting to see the dividends of that. 2J and Antenova is our RF and wireless cluster. I'm going to come back to that later. And then last but not least, we have three individual businesses. Santon, we've talked about it a little bit. Santon was probably my only problem Charles, really. And that's because we've had three business units within Santon and one of those business units didn't really fit with the discoverIE business model. The margins didn't fit for us. The products were a little bit too commoditized. So we've disposed of that business. And the two businesses that are left, which are focused around power components, they've got a long history in high-power DC switching for industrial applications and Circuit Breaker solutions. Those two businesses now are in great shape to go forward. The management team are here, so please do talk then when you're in the exhibition. MTC, I'm not going to talk about MTC anymore because we've got two problems with MTC now. One is that Simon has talked about them quite a lot, but I've actually got the Managing Director here. And all the hears is good things about how good MTC is. So if you could, when you see sort of downplay it a little bit because of need them to keep going and not think that the job is done. And then finally, Sens-Tech. Sens-Tech is my favorite business out of all of these because on my way on from the office and they've got a brand-new coffee machine. And I'm going to come back to Sens-Tech later. So let me just talk a little bit more about cluster management and I'd like to start off by saying what cluster management, what it isn't. What we don't do is we don't take a group of companies and try to squish them into a one-size fits our business model. What we do is we leave the individual day-to-day management to the operating team. Each of the businesses have their own MDs and their own financial controllers. But what we do is we put cluster management above the team, the local team and that enables them to see the bigger picture. And that bigger picture might be a commercial bigger picture where they can start to share sales synergies. So for example, within the Variohm cluster, some of the U.S. businesses have access now to the European market and vice versa. It might be that they share some product so that they can work jointly on some cross-selling opportunities. I'll talk about that later. I'll give you an example. It could be that they use the opportunity to expand the product portfolio and increase the share of customers' wallet. There are also operational efficiencies Jeremy and Simon mentioned it earlier, we have a manufacturing -- really state-of-the-art manufacturing facility in Hungary within the Variohm cluster, and they are now making product for several of those businesses, individual businesses within the Variohm cluster. And it also increases the bundle of the business. So I tend to think of this as having three advantages. Firstly, there are the operational and commercial synergy that I've spoken about it. But because we've now got this mature team in Variohm Group, if we identify any more sensor businesses, we can rapidly integrate those on and bring them on board and sort of enable them to grow as quickly as possible. And then the final thing, which Jeremy alluded to is, I think with an acquisition and often we buy from own managed businesses, there is, of course, there's the commercial side of that. But there's a slightly softer side as well, which is that often owner managers, it's like the child is finally growing up and he's leaving home. And what they don't want to do is find that child just loses his identity and it loses his brand name and it just comes and gets squished into some big business model. And what this does is this -- when owner manager is looking at discoverIE, sees that this is a discoverIE is a good home because whilst we enable the child to mature and go on and live an independent life, what we also do is we keep that sort of special independents, they don't just get lost in the noise. So I think the cluster management is particularly attractive. And the best example we have the cluster approach is Variohm Group. So within Variohm, we have now three businesses within -- based in the States, CPI amongst Phoenix, limiter in Germany and Hungary, Politic in Variohm are in the U.K. Just for those of you who don't know, they make a whole variety of different types of sensors, positional sensors, temperature sensors, all the products they supply are largely customized. They might be based on the core product but then they're customized for the individual application. We've got some numbers up here about the size of the sensor market. it surprises me that I would have to explain to anybody how big the sensor market is it's just enormous. It's in practically every electronic device you can think of would have some kind of sensoring. So it's a huge market. And from an acquisition perspective and from an organic growth perspective, it's a really rich theme for us to continue to mine. There are lots of other sensor businesses out there, and there are lots of opportunities for sensor applications. Since acquiring Variohm in 2017, we have, as mentioned several times, extended manufacturing in Hungary. We have got certain operational efficiencies and engineering collaboration across the cluster. And it does enable us, when we have a cluster of businesses, it enables us to bring on a higher caliber of management team than we would be able to bring on just for a small business. Simon mentioned earlier that we've now brought on an ERP system, which we're rolling out across the group. There's absolutely no way the level of ERP -- the level of IT that we brought into these businesses, they wouldn't have been able to bring that on themselves. Not only wouldn't they have been able to do it from a financial perspective, they just wouldn't have been able to do it from an expertise perspective. We have a small but very expert team of IT specialists in Gilford, who go on site, identify the right type of system for that opco and then help them bring that on Board. And as I mentioned earlier, the best thing about this business model is it means we can -- we've got a great foundation to bring on additional acquisitions. But does it work? So the numbers really speak for themselves. It's been a fantastic story at Variohm and it's still only kind of a few years in some of the businesses that we've acquired in Variohm Group, we've add there for less than a couple of years. Revenue growth has been 20%. Operating profit growth, 32%. I think the key standard for me is the organic return on capital employed. Since we acquired Variohm in FY '17, the business that was growing at 21%, has grown by 36%. It's an outstanding result. And as Jeremy said earlier, the great thing about this team of people that we've assembled is they're just hungry for more. So a very close working relationship with the M&A team, rich seam to mind. I really expect this just to go on and go on. What I'll do now is I'll talk to the bits that I'm most interested in, which is the bit about sort of applications. This is a really good example of cross-sell. And I pick this because we've talked about cross-selling but what does it mean in practice. So this is a really good example of cross-selling. Those of you might be some people in the room have had an MRI scan, the traditional MRI scanner is lie in a bed and fed to a tube, which is quite claustrophobic, quite unpleasant for patients. And this is a new MRI scanner for cancer treatment and this is with a seated patient. So the key element here is positioning the patient. If the Variohm salesperson had gone in as they originally did, they would have had just 1 or 2 products in their portfolio, a linear and rotation position sensor that was required. Then they identified the need for load cells to measure the fourth. There was a requirement in this case for a bespoke custom hand controller and some DC motors and actuators to position the seat. So the net impact of this was we went from just having one product to designing in six components, which were supplied by four companies across the cluster and we increased the share of the customer's wallet in each of these from less than GBP 2,000, about GBP 1,500 to over GBP 10,000 worth of components for each of these units. That's what cross-selling can do. It can enable us to really increase the share of customers' wallet. This is just one example. We've really -- in some terms, when you think that often the design life cycle might be a couple of years, it's not unusual if fit to be 2 years or longer, particularly medical applications. We're only just on the journey here. We've started this journey and I think there's a lot more benefits to come from cross-selling. Right. Now I'm going to talk about my favorite subject. So I've spent my career in operational and commercial roles in electronics manufacturing. But I started out many years ago was a radar engineer which is -- it seems like a long time ago now. And so I'm particularly soft spot for RF and wireless. We've acquired two businesses in this area, Antenova and 2J. We acquired Antenova in 2021. 2J just almost exactly a year ago. At a very high level, Antenova, supply, design and manufacture antennas that go inside the device. So they'll go into the circuit board, 2J an oversimplification. 2J largely supplies external antennas that sit outside the device. So first, they are very complementary products These are not overlapping product ranges. Secondly, the businesses themselves are very complementary to each other. So Antenova, largely based in Taiwan with some sales in U.K. and Europe -- U.K. and U.S. on 2J operations. So a state-of-the-art manufacturing facility, I think it's our best manufacturing facility, but Martin might feel differently. But a state-of-the-art manufacturing facility in Slovakia. Three laboratories, well we now four laboratories around the world, one in Taiwan, one in the U.K., one in Slovakia and one in North America. So world-class engineering and manufacturing capability and really complementary products. So far, we've achieved cost synergies of GBP 0.5 million -- over GBP 0.5 million just by removing some duplication. We've put in place a cluster management team and they've already started bringing the businesses together so that each business is selling to the company's products. We're working on somewhere around 20 jointly supported design projects, manufacturing and procurement synergies. So we've got a central excellence for procurement in Taiwan and the central of excellence for manufacturing and engineering in Slovakia. And we've also saved some additional CapEx because without the addition of 2J, we would have had to invest in anechoic chambers and RF laboratories for Antenova. And those kind of -- that kind of equipment starts at kind of $1.5 million. So substantial CapEx savings. I'm often a bit surprised -- well, not surprised but because a lot of people don't know about RF and wireless. I think sometimes there's an assumption that it's a simple sort of commoditized product. I mean in this room, there are probably, I'm guessing, 500, 600 down tenants. There are 5, probably 6 in these, cellular, Wi-Fi, Bluetooth, NFC, GPS and then I've got a couple in a watch and I've got one currently sticking out in my pocket for this microphone. So a lot of antennas. It can't be that hard. It must be pretty straightforward to do an antenna, and must be a commodity product surely. This is an incredibly sophisticated device. But every now and then, I still have to say I'll phone your buck. I mean a black spot or my favorite, a personal favorite, I'll just wonder over to the window and see if I get a better signal. So Antenova and 2J don't work in those -- these do not work in those kind of applications. The reality is the antenna is not that important in that kind of device. These are the kind of applications that Antenova and 2J working. So this is an example of a smart grid application. In this particular instance, it's a smart meter. Smart meters a key component in large-scale water networks. They not only provide usage data, but they're also early indicators of leakage. That particular example has to be able to send a signal to a cellular network and it has to work every time. That water meter cannot go over to the window to get a better signal. It also is a water meter. Somebody will have added in the garden decided to build a garden shed on top of it. It has to be able to withstand traffic because sometimes during the middle of the road. Hence, it's in a metal pit. And I think I'm sure you all remember the day in your physics lessons when the teacher tell you, RF weights do not travel through metal. So we've got a challenge here. We've got an antenna that has to work and easing them on box. On top of that, the antenna has to work efficiently. And what do I mean by efficiently. So if an antenna is not efficient, then the device has to try harder. It uses more power to send a more powerful signal that drains the battery life. This customer, a North American customer, they guarantee a battery life of 10 years. So this is an example, we developed a custom antenna solution for this. It was initially designed by our team in Taiwan. This project started over 2 years ago. So we've been working on this for over 2 years. We finally through the acquisition of Antenova, we were able to get the customer and the engineers into the laboratory in Phoenix, Arizona, which is really world-class and nailed down the fine tuning of this antenna. It's been through certification. All antennas that go into the cellular network have to be certified. It is quite an expensive and time-consuming pro. As a result, we've got quite an intimate relationship with the customer. During my time working with Antenova, I was previously a nonexecutive Antenova, during the time that I was working with in which was 10 years, I have no experience of Antenova being designed out of a project once they've been designed in. It just doesn't happen. Once you're designed in, in RF and Wireless, you're in for product line. I managed to apply the sales and manage it with a little bit of alcohol last night, and he told me that's a conservative number, but that's what I'm going with. So we expect it to be $500,000 a year for about 7-year lifetime. And that's just gone into production. So that's been 2 years in the making. Sorry, I spent a long time on that, but this is a great area. It doesn't matter with a smart grids. It could be a smart meter for electricity. We're working on smart EV charging networks. Then there's a massive broad application area of asset tracking. So it could be -- we're working on high-value container shipment, trucking containers, pallets, pets, people, all sorts of applications where antenna performance is critical. Then I'd like to talk finally. So I picked one application, which is cross-selling. One application, which is why RF and Wireless is an area that we've specifically chosen to invest in, and now I'm going to finish off with an application. An application Sens-Tech case study. This is a fascinating application. So basically, the wood pulp, very hard wood, they putting it through a big pulping machine, and they had a requirement to increase throughput. What they have is they have a conveyor belt, about 2 and a bit meters wide. They have an x-ray scanning bed very similar to what you've seen in an airport, which is looking for foreign objects that may damage the pulping machine and tell that, that could be things like pieces of chain saw or other bits of pieces that could get mix up with the wood before it goes through the pulping machine. They need to increase throughput to increase throughput, they needed a wider conveyor belt. They had a building, they had a number of buildings over a certain size. If they didn't but if they have gone to Sens-Tech competitors, Sens-Tech competitors would have said, we have a solution, you need a bigger building. What Sens-Tech did is they worked very closely with the customer. We're talking about calls weekly, at least often daily. And it started with the customer coming over and saying, "What I need is a curvy conveyor belt like this" on a whiteboard. That became a little bit more sophisticated in the pitch you see at the top. But effectively, if you can have a curvy conveyor belt, it's bigger than a flat conveyor belt in the same space. From initial brainstorming to delivering one of these products and that picture really doesn't do justice to it. This is a 2.4 meter long sort of curve conveyor belt. That went from whiteboard to final design and we've now shipped two production units. These are expensive items two production units in 6 months. And from a technical perspective, and we've got some real experts in the room, you've got to go whatever time you spend on the other division, do make sure that you spend some time talking Sens-Tech. In essence, x-ray is really, really small wavelength, nanometer wavelength very high energy. And getting a crisp image on a conveyor belt that's going up quite quickly on anything that isn't flat is really difficult. We've designed this solution but the IP, the know-how is Sens-Tech. And this same IP and know-how can be used in other applications such as why cycling and recycling where basically got large quantities of material going through that needs to be sorted. So a really, really exciting story of highly customized solution, right? I'm just going to wrap up very quickly. Just summarizing what I do at Gilford for Nick's benefit is I focus on driving growth. And we do that -- Martin and I do that together through a very specific process or design win process. We set targeted growth rates for each of the businesses individually and we review that on a very, very regular basis. We do also target efficiencies within the business, often from the position, I mean, I can see where efficiencies can exist within a business that is much easier for me to see than it is for the individual businesses. And I've just picked out a few examples of the kind of portfolio management over the last few years. Moving production to the lower-cost site in Hungary, not only within the Euro sense business but across the division. Sale of the underperforming business unit and seller market, remaining to sell the business now in great shape. We created the components cluster, and we're just starting to drive some operational efficiencies through that, and we took the decision to invest in RF and Wireless and we're driving this fantastic new cluster based around 2J and Antenova. Right. I'm not Zing down now. So I'm going to hand over to my esteemed colleague, Martin Pangels.

Thank you very much. Thank you, Paul. Afternoon, everyone. The -- I was asking myself, why am I presenting after port given that my division is bigger than his. But I now realize why because Lilly has the foresight of the risk of putting a Yorksman together with an engineer in front of a big audience. And so he's going well over his time. So the reason I'm up second is because I'm German, and so we're going to be real quick like. So my name is Martin Pangels. I've been with the group for 15 years. I've met a number of you already over the years. I've had a number of different roles within the business as it changed since we've created these two divisions. I'm responsible for the Magnetics and Controls division, which I'm very pleased to talk to you a bit about and tell you about how we grew. Very similar to SNC back in 2014, 2011, we have nothing with the entire division has been built up over the last 10, 12 years with lovely growth rates in both in revenue and profit, but more importantly, building some very strong positions in a number of technologies. The -- even though we started with Hectronic with the first acquisition, we then focused quite heavily on magnetics. With Myrra, Noratel, Flux and Plitron in the early years. And then more recently, we added Hobart in the U.S. and Shape in the U.S., and I'll talk to you a little bit about those. And then separately, over the last few years as we started building the Controls business -- building the Controls business, electronic with cursor control Beacon, which is the other embedded business, Silvertel in Wales and most recently, Diamond Technologies, in which we acquired in March of this year. So with this, we not only developed a quite a sizable business now in terms of revenue and profitability. We developed a strong position in magnetics, very internationally, and we're on our course still to build a controlled technology area. And more importantly, I think we've diversified, also geographically with -- if you think about back in 2011, it was all the U.K. We had, had hardly anything in internationally and certainly not in North America, where we now have to generate about 1/4 of our sales and about 20% in Asia. The way we organize it, we're looking at the magnetic cluster and embedded cluster, as Nick alluded right at the first stage, the -- we're in different stages of development. And I think it's fair to say that in S&C, especially the sensors cluster is the furthest advanced in getting the benefits and having the organizational changes here. We are a bit behind. But more and more, we're working on that, especially with Noratel and recently the acquisition with Shape. Just briefly on magnetics, it goes from Noratel that build big reactors can weigh a ton and are up in a wind turbine to flux where some of you have seen on a recent visit in Denmark, it's magnetic components being wound under microscope because they end up on satellites, as Nick alluded to in his opening. So very similar technologies, very different applications. With the embedded cluster, Hectronic and Beacon are quite similar, they're strong, in particular, in medical and transport, but they do slightly different things. So they don't overlap each other, but complement each other. We heard about Cursor controls, the HMI business as that Nick had the example for and Silvertel is one of the recent acquisitions in wells for power over Ethernet, which gives you the ability to transfer both power and data over an ethernet cable. They don't do the cable, they do the module that connects to the cable. So that's the division as it is. Magnetic is it's the biggest. Now magnetics themselves, though, there are still huge growth opportunities and it's really linked to the big megatrends. As the world -- as the economies grow, as populations grow, we will need more electricity you just need -- we did a river cruise along the TEMs last night and just the building works of residential skyscrapers being built, they will need electricity, they will need efficient distribution system to get that electricity to them. And secondly, it's the renewable energy. So much changing to electrification and I won't go through all the details of the different areas. But one example is electrification of shipping. So as it happens, Noratel based in Norway. Norway has a huge shipping industry, they've been working with ship manufacturers for many years, and they're currently involved in one of the first biggest project of electrifying a ship and playing a crucial role in that. As there are the growth opportunities, well, it's very simple. As Nick said, two simple things. We're focusing on target markets and this is the breakdown for Magnetics and Controls. So nearly 100% of new recent wins were in those markets. Now interestingly, what Nick said, I think security you said accounted for 9% of revenue. Recently, it accounted for 24% of design wins, which just shows the opportunity that is within that area. The way we go after Paul mentioned it earlier, is a very clear focus on driving the pipeline, driving design wins. We've created this dashboard, which we helps us communicate with the various operating companies to understand what they're doing. Are we doing enough? Are we doing it in the right places? Are we doing it with the right customers? And we have now quarterly review specifically on that topic. Now Paul is the engineer. He gave you lots of detail about a number of examples. I just want -- didn't want to be left behind. So I thought I should chuck in a few as well but I will -- you can talk to the engineers about it afterwards. So I will stay at a high level. In our target markets, the first one of power over Ethernet with Silvertel, we recently won a project there in the U.S. where sensors are put up in high schools in toilets and in particular to detect vaping. So that's the world we live in these days. Target market Medical, Beacon, as you will see on their stand, they are very heavily involved in providing essentially the heart of the defibrillator, the computer that defibrillators run on and they are working with the customer there to create a low-cost defibrillator, which will allow the end customer to penetrate a market that previously they weren't able to do because it was cost prohibitive. This one, I'll put up just to highlight the niche focus. So this is in magnetics, where we provide the power supply system for hydrogen production. So pretty niche to me. Then the last three, a couple of defense, just to make the point, Nick alluded to them already. The first one is a energy, these are the two embedded companies, a computer for tactical communication systems where soldiers talk to other soldiers and the second one is a simulation tool for training purposes for soldiers. So as Paul says, we're not at the point end were but if its support in defense, then we'll look at it. On transport, just to make the point that we're not in automotive, even if it ends up in a vehicle, project there. We're working on is a display for off-road vehicles, which has particularly requirements in terms of ruggedness, et cetera. And the last one and another example in -- from magnetics on trains, within transport train industry is getting more and more interesting for us for a number of technologies and internationally, both in the U.S. and Asia. So with that in mind, we -- there are growth opportunities and we'll focus on sales growth, but what's the point of growing sales, if you can't grow the bottom line. So just as much as we focus on driving in the chop line, we're looking for efficiencies. And this example from Noratel from the last 6 years that Simon alluded to earlier, shows the -- how they progress from their 10% return on sales to 16%, which is half based on volume, grade is coming through. But then the other half is coming both through gross margin and OpEx efficiencies. And the way we've done that is with -- through various measures that we talked both by Nick and by Simon on working with the infrastructure that we have, the manufacturing side that we have consolidating where we can, moving where we can, and that adds up to driving the bottom line. And in particular, one example for the next slide is where we were able to do that with Noratel, building the Noratel cluster in the U.S. Now on the earlier organizational slide the eagle eye spotted that Plitron and Hobart weren't on there anymore. The reason is because they are the exception so far, where we have integrated them and because it made sense. So the -- having bought Noratel originally in 2014 gave us the first magnetics positioning or position in the U.S. We then built on that with Plitron in Canada and with Hobart in Indiana, lastly then with shape in January. And what we did with the first two with Plitron and Hobart essentially consolidated what we could within existing facilities. And so the office in Plitron has no production anymore, but it's essentially a sales office. Hobart, we've consolidated within the plant in Mexico and some of the production we moved to Asia because it made sense to have it in Asia. So that's a good example where by looking at it in the round, we can both grow sales. So we now have GBP 30 million worth of sales in the U.S. just in -- with -- in the Noratel cluster and we've generated sizable operational efficiencies. And a similar slide to Paul. I don't know whether the mine is better than yours, but I'm quite happy with this one. Because it's not just about sales, it's not just about operating profit, but it's also working, especially with Noratel being the biggest business in the group, it's working, driving the KPIs that we have for the group overall. So just looking through that quite quickly, sales growth of 7%, which is in line with the group average. Profit growth nearly double that leading to the strong improvements in gross margin of 600 points. The return on capital from nearly traveling from 12% to 30% in the last 10 years, return on investment, you know what our internal target for new acquisitions is to get to 15% ROI within 3 years. We nearly got there already in year 1. And by year 10, we're at 33%. And one way we got those returns is through the working capital, which Simon mentioned earlier, halving from 29% to 15%, it's phenomenal, especially with the size of Noratel and its complexity around from Asia all the way to North America. Whilst we did that, we're growing the target markets, and we are internationalizing further. And this is only a staging post. It will continue. So there is much more to come. Then just a brief one on the embedded cluster. So what we're doing there, we bought Beacon in the U.S. back in 2021 based in Minneapolis, a sizable business. We then added on Diamond Technologies, which reports into Beacon in March based outside of Boston, a lot smaller, but in a similar -- both similar technology and quite heavily in the medical area and apart from Diamond being a nice business that fits into the group and that was attractive as an acquisition. The main rationale was because the DTI currently develop products and then have outsourced manufacturing with third parties by bringing it into the fold with Beacon, we are able to take that production internally into Beacon capturing more of the value that is being generated because Beacon has a number of accreditations, they can open the door to DTI to customers that DTI on its own could -- wouldn't be able to get because it's too small. And they have opportunities for complementary products and cross-selling, which this is early days we'll work on it. It will come, but this will be a great case study in a few years to come when we look back and said, this is what we said we'd do, and we will come back and tell you that we've done it. So to conclude, back to Neale. Yes. I am actually. I've made up your time. So to conclude just a couple of comments on the future. The last 10 years have been phenomenal. We want to do it again. And looking at what the situation we're in, I'm convinced that we can. And the reason we can is because the -- we have a clear view of how we deal with the businesses, what I'm looking for in the division, in particular, is the -- to get the both -- best of both worlds of the decentralized model, having local -- strong local management in the businesses, making decisions as close to the customer as possible so that we don't become the bottleneck at head office. And secondly, by clustering so that makes the model more scalable that we can add more businesses to it. But at the same time, gaining efficiencies and synergies, which will come more naturally by clustering the businesses and bringing them closer together and we do that in a market that remains hugely attractive. The target markets are there whether there are some dips in the short term or not is another matter. Longer term, the opportunity are clearly there. Despite our efforts to consolidate some of the areas that the technologies we're in, the markets are still hugely fragmented. So there are great opportunities, both for organic growth and future acquisitions. And as we do that, we grow our global reach across the world and are able to exploit the opportunities that are in those markets with that strong focus on business development and the design wins. So I'm confident for the future. On that note, that's me done. We both Paul and I talked a little bit about opportunities within clusters. What we want to do now is the last section before we go into the demonstrations is to give you some insights into collaboration across clusters and across businesses. And that is where Neale Sutton comes in, the Group Development Director. Thanks very much.

Thank you, Martin. I thought that all-time pressure was going to go out of the window with Paul's session there, but Martin has pulled it back, just pining it on. So we'll see how we can do. So I'm Neale Sutton Group Development Director. And just by way of a bit of background, I transitioned to head office role with discoverIE back in January '23. I say transitioned because prior to that, I was Managing Director of operating company at Cursor Controls, including at the time of acquisition back in 2018. As Martin just outlined there, the goal over the next few slides is to give a little bit of insight into the overarching group development strategies and frameworks that we've got in place that extend beyond the collaborations and the synergies within clusters or within divisions. The fundamental goal of the group development function is to ensure that all of the operating companies that sit within the group are able to benefit from their position within the discoverIE family. That's without impacting on the integrity of that decentralized model. I've experienced first time the power and that the benefits that come from being on the other side of the table, the power that discoverIE brings blended with that localized autonomy, the agility and the strength of brand that the [ opcos ] bring as well. And so all of the frameworks that we look to build out on the group development side are respectful of that. In order to ensure that those collaborations work, there needs to be a number of aspects between the parties, between the businesses, in particular, when it extends beyond divisions and beyond clusters. There needs to be that level of trust and respect across the parties that are involved. And thankfully, that flows naturally by virtue of the discoverIE DNA, which has been touched on as being so important through the acquisition process than the continuing running of the businesses. And with that shared DNA, those shared values, it's far easier to bring those businesses together. The other aspect, which is absolutely critical, is that there's a level of familiarity and awareness of those synergies, are those collaborative opportunities that might exist for the business. And so to that end, the last 18 months or so, we've seen a real strong focus and improving the internal communications that we've got starting to promote and advertise the capabilities, the products that sit across the businesses to all of the wider operating companies as well. And that's culminated in the last 2 days, the first ever discoverIE Connected conference, where as Nick touched on, we bought 100 of the senior management team together. And that's been a fantastic foundational position for us to grow some of those broader collaborations across the group as well. So there's three core areas that we look to drive those collaborations, three value pillars, if you like. In terms of the sales synergies, we've touched on some of that activity within clusters. But as acquisitions grow and the structure grows, the number of products that sit across the business, the product portfolio that grows, we're seeing increasing opportunity where one operating company will actually have a requirement for the product of another operating company. And there are several examples of exactly that on display in the exhibits room when we go through there in a short while. As well as that familiarity grows across the divisions, across the clusters of the products that sit within the group, there's such adjacency and overlap with the applications and markets that the operating companies are targeting that when one operating company is in front of a customer, they're able to identify potential opportunities for another operating company's products, bring them into the mix and make those introductions. And those introductions are absolutely key. And so across the group, we've got customers in 70 countries, fantastic sales channels into those and fantastic relationships with those high-quality customers, as Nick touched on earlier. Now opening the door into those customers can be challenging. It can be a multiyear process. But when we've got existing relationships within the group, those doors are far easier to open those introductions from a trusted existing reliable supplier, carry a lot of weight and massively accelerate the opportunity to penetrate those customers and start generating revenues with them. As well, if operating companies are looking for distributors or channel partners in territories that they don't have representation, they're able to turn to true trial and tested partners that other operating companies might have. And then lastly, you may have seen some pictures on the slide deck in the registration area, joining forces at Exhibitions as well, improving the footprint that an operating company may have presenting complementary products with the various brands very much front and center in that regard. We then have operational leverage. And across the group, fair to say some fantastic operations, which they need to be by virtue of the regulated markets that we're supplying into. And a prerequisite for a number of those is very, very often accreditations and certifications of those production sites and those production processes. You can see a snapshot on here from medical clean rooms through to aerospace and a hugely impressive European space agency technology flow qualification that we possess as well. And what that means is that any product produced in that facility is suitable for space applications automatically. That's a huge barrier to entry for people that are looking to enter those markets and a huge differentiator as well. And the way that we're able to leverage that across the businesses, if one operating company is looking to enter a new market that has one of these certifications as a prerequisite they're able to benefit from the experience, the processes, the controls, the templates that one -- another operating company may have, again, smoothing and accelerating the progress into that area. And it's not just the certifications and accreditations that are impressive across the group as well the production capabilities and manufacturing capabilities that we have and they extend all the way from injection molding and complex material compounding all of the way through to latest generation, cutting-edge, automated electronics assembly and printed circuit board assembly. What that means is that we're increasingly able to leverage those manufacturing capabilities across the business as well. And we touched on the sales side, whereby we're seeing one operating company actually having a requirement for products of another, that rings true as well for manufacturing. And what we're seeing is certain operating companies that outsource elements of manufacturing, actually now have the opportunity to bring that in group. And house it at another company that possesses that. A number of examples that are listed on display there, and they're all actually on display in the exhibition room as well. And the company is involved would be delighted to talk through them. One, very worthwhile mentioning. Nick touched on it before, the complexity of the printed circuit boards that Sens-Tech used in that x-ray systems. They're actually now produced by Cursor Controls following the investment that Simon outlined a touch earlier. As well, the gentleman before me have outlined how we're able to leverage the global footprint of the businesses as well and an increasing frequency of that being able to relocate manufacturing from, say, Europe, across into America for by local directed, supporting deglobalization, but also then enhancing margins as well, moving location to the lower-cost manufacturing sites. And there's a number of examples from limiter that are in the exhibition room as well. The final pillar, and for me, the most exciting and where there's a lot of midterm value for us to drive. And that's technical collaborations. So those processes, the products, the operations, they're all underpinned by fantastic engineering competency that sits across the group and you'll get to meet some of those teams very, very shortly. That engineering competency, whether it be on the mechanical side, the electronic, electrical side, software, firmware development, what that allows the businesses to do is optimize their products for certain applications. And that application and market experience is also incredibly valuable in that engineering environment. That gives the operating companies the opportunity to provide highly differentiated products that have a lot of intellectual property built in to them. That's on a stand-alone basis. When we start then combining those technology offerings, going into joint developments, which you'll see very shortly, it can lead to a very differentiated product and supports that drive up the value chain. We've got a case study, which I'll jump into shortly, and that's from Cursor Controls and Hectronic. So Cursor Controls and their subsidiary, NSI, long-standing supplier of human machine interface solutions into maritime and marine environments. They had a long-standing customer in that market who are then part of the Teledyne FLIR consolidation of maritime electronics manufacturers. And they then benefited from the acquisition of that business into Teledyne FLIR being exposed to a broader range of potential applications for them. That then led to an interesting conversation whereby some issues were identified to the Cursor Controls team with a solution that was being produced by the Raymarine division of Teledyne FLIR. And very, very quickly through those discussions, [ Freddie, ] the MD at Cursor Controls, identified that part of the driver of the cause of that, whether it be the quality issues, the lead time, the supply chain management or the lack of serviceability of that product, part of the reason for that was because it was being made up of discrete components with no marriage of IP and no sort of total ownership of that product. So the solution that [ Freddie ] put forward to them was that Cursor Controls would develop a completely integrated solution, taking care of all of the aspects of development and providing a modular unit for them to move forward with. Fair to say it's not typically the type of application that Cursor may have targeted. Reason being that alongside all of the human machine interfaces, all of the touch points of that system, it also required an embedded computer. But [ Freddie ] had the confidence there to turn straight to sister company, Hectronic, who specialize in embedded computer development with a wealth of experience in maritime certifications and accreditations and was able to deliver a very strong proposition to the customer. What that then led to is one of the highest value contracts that Cursor Controls have received in a very appealing market, controlling of thermal imaging cameras for manoverboard detection and general maritime security applications and strengthening the relationship with the customer, as you'll see very shortly. And just to touch on there for everyone that's viewing online. Unfortunately, we're not able to stream the video online, but we'll be back in a few minutes. [Presentation]

So with that, giving a quick overview of what was done, I'll invite Jason from Cursor and Tommy from Hectronic to the stage just to outline exactly how we go about that.

Everyone, my name is Tommy Olsson. I'm the Engineering Manager at Hectronic.

Everyone, I'm Jason Roberts, Head of Engineering at Cursor Controls. We're going to talk to you today about how we work together to deliver the Excalibur project. So as will be the case with many of discoverIE's OpCos, we follow a fairly strict new product introduction process. This forces our projects to move through a sequential set of development phases and gateways, which means that we -- it kind of forces us to make sure that requirements and deliverables are provided at the right time in the project and eventually get to serial production. This project did come with pretty aggressive timing requirements. So obviously, having strict and good processes and also very good project management for both ourselves and Hectronic was pretty critical to get to where we are today. This project also came with quite a lot of requirements and approvals for us to be able to sell or Teledyne to eventually be able to sell this product into boats around the world. So lots of requirements, tight time scale is a bit of a perfect storm for an engineer really. So with those requirements, we had to spend quite a lot of time reviewing those requirements and nail down a product spec that Teledyne we were happy with. So we did that in the form of a data sheet. Once we got approval from them that we were designing a product that they are after, we were able to move into the design and development phase. The first step was to establish a good concept. They provided quite a lot of information. This product needs to be very aesthetically pleasing. Obviously, it needs to be designed to work on boats. But what they provided us wasn't necessarily realizable. Could we make it? So we have spent quite a lot of time on mechanical design, sourcing parts like custom LCDs that were suitable at minus 25 is quite a challenge. Custom knobs for joysticks, can we design custom components, mechanical components that we could then manufacture, assemble, disassemble. Once we got that approval from Raymarine, Teledyne and they were happy with the aesthetic look of it, which they were because we tried to keep it as close as we could to the original design intent, we moved into detailed mechanical -- detailed design. So Cursor Controls, we've got a good experience, very good experience of designing aesthetically pleasing HMI products like keypads, truck [ balls, ] control panels, et cetera. So we decided to do all of the design work in-house. We are used to designing for sort of plastic, silicon and metal housings, et cetera. We also design and manufacture electronic assemblies in-house as well. So we did it all in-house, but the one area that we couldn't and a very critical area of this project has already been mentioned, we don't have expertise in embedded PCs. And this did have a requirement for a Linux-based embedded PC, which is why we collaborated with Hectronic. And Tommy will describe more on that.

So when Cursor came to us with this, it was pretty clear from the beginning that in order to meet the requirements and kind of the tight project schedule that Jason is talking about, it was really important that we could rely on our building block strategy that we have at Hectronic. It can take thousands of hours to design a custom -- a reliable custom computer board, but we can most often do that quicker because by reusing already prevalified IP blocks from previous designs. So in this case, we were even able to use our most successful platform, the ARM-based Texas Sitara platform. The design, the schematics and layout for the product took about 2 months before we could initiate prototype production and start sourcing. Hectronic also did the software for the board. But having started with a -- previous platform gave us a very -- we got a lot from the start. So the focus we put on custom drivers mainly for the LED keyboard and for the joystick as well. [ Next ] slide. Once we received the prototypes, we started functional verification and pre-validation. Functional verification in a product like this is the most time-consuming part. The report alone for this specific product is about 140 pages, including everything from voltage measurements to I/O functionality testing, making sure that all the requirements are fulfilled with the product. Second to that, we also spend a lot of time on pre-validation. Hectronic has a lot of experience in designing products for regulated markets, especially for the marine market. And since Cursor was doing the type approval in this -- for the system, in this case, we really wanted to make sure that there were no surprises once that started. Finally, what we've also done, what wasn't actually mentioned in the video is that for each product that we design at Hectronic, we also always make a customized production test system. We have been perfecting this software for that's used in end-of-line testing for more than 20 years now, and it's a cornerstone to our really reliable quality at Hectronic. It's also very cost efficient for our customers to compare to sourcing such a service externally. And it gives us full control of the serial production for our quality department because everything is monitored and logged in our offices as well. And in this case, we also made a test system for Cursor as well that they could use in the system production again.

So on the right-hand side, you'll see an image. This is the joystick controller that we're referring to. So all of those -- that whole assembly is not only designed in-house at Cursor but also assembled our factory in Newark as well as the PCB assembly. Every device is end-of-line tested to ensure that it's built correctly using the PTS that Tommy has already described. So part of the design development process is creating prototypes, putting them in the hands of customers, letting them evaluate it and make sure they're happy with the design. We do that using rapid prototype techniques. Later on and more recently, we've created preproduction devices using representative materials and techniques and hard tools. It's very representative of final product. That is then later on used to qualify the device at a test house. Teledyne, we were very clear during the tendering process that they were -- they saw U.K. manufacturing as a really strong positive. So we really think that helped with us win the project. So for us to be able to sell this to Teledyne and Teledyne ultimately to be able to put this on chips all around the world, the device has got to go through marine type approval and also certification for regional compliance such as CE FCC certification. So a lot of time has been spent at test houses to do lots of environmental, mechanical, electrical EMC testing. We're due to finish that in a few weeks' time. And after that, if that all goes well, we'll be looking at serial production. Teledyne also came to us with quite a comprehensive set of customer requirements because they have quite high standards. So that also resulted in lots of additional in-house testing by both Hectronic and Cursor Controls. And as Tommy has already mentioned, they provide us with a PTS production test system, not only to help with end-of-line testing, but also to help with the qualification, monitoring a device before, during and after test to get through that compliance. So to wrap it up, I mean, between Hectronic and Cursor Controls, our capability, our experience, existing product sets, engineering and manufacturing allowed us to offer a complete solution that we wouldn't have been able to do on our own. I'm not sure Hectronic would either, but a lot of our -- a lot of Teledyne's existing suppliers and our competitors also wouldn't be able to provide, shows the collaboration, the benefit there. And also, this was our first time collaborating with Hectronic on a project of this scale, but we found that because we had a similar approach to engineering, similar way of working and the fact that we have similar goals in obviously trying to make this project work that it was much more of a -- it was similar to working as a single engineering team rather than a typical customer supply relationship, which can sometimes be a bit sticky when things go wrong. Hectronic have really helped us out there.

Yes, I totally agree. It was apparent for us pretty early in the project that the [indiscernible] of our engineers really complemented each other and just as Jason said it's -- I was even surprised when it exceeded my expectations of how similar we work with Cursor and how easy it was kind of to connect in our processes. So it's more or less working as [indiscernible] competitor working in the kind of customer and supplier relationships.

And the last point due to the success of the project perceived at least from the customer, they have since come back to us with a number of projects for us to bid on, which obviously shows a good sign, one of which is the pathfinder, keyboard here, which is another marine application. We've very recently last week at SMM exhibition at Hamburg demonstrated a semi function of prototype just to demonstrate, which is coincidentally the venue where we first talked about the Excalibur project with Raymarine and Teledyne 2 years ago. Again, it shows the benefits of an exhibition, keeping in touch with customers and obviously delivering. And in this case, it shows the benefit of a good collaboration.

Thank you, Jason. Okay. So we're just about to finish the slide decks and head on through to the exhibition. But I'd just like to leave you with 4 points before you do so. Firstly, I hope you've seen today that we've got a very clear, simple, straightforward, proven strategy that I think you'll agree has delivered some very strong results over many years. We think we've got very strong foundations and fundamentals for future growth. We have a clear plan that underpins the next phase of the growth of this group over the next 5 to 10 years. I hope you agree with that. We're very fortunate to operate in very, very high-quality markets, which give us scope to compound and grow, and we are able to achieve more efficiencies as we go through that. It's a great place to be, and we don't miss that. And finally, it's a fragmented industry. It's huge. We have a small market share with very strong clear opportunities to consolidate. So we think that's a great place to be, and we're very confident that the next few years will be as exciting as the last few. So with all that, I'll thank you for your attention and bearing with us through all those slides. We now have about an hour and 20 minutes for you to meet all of the businesses that we've talked about. You'll meet the people leading the businesses. You'll be able to talk to Tommy and Jason and other engineers in the room. You'll see collaborations, you'll see product showcases, you'll see each of the businesses. And then when we get to the end of that at about 5:00, we'll have a wrap-up with some Q&A. So if you'd like any -- to ask any questions or sort of cover any particular topics, we'll do that through in the exhibition hall. And Please, just one sort of housekeeping point. You've got a bag with you. The bag has got quite a good little takeaway and it actually, you might have to declare it. It's a half decent one. So please take that with you. Don't leave them here because they might get swept up. And then when we get back, when we've done the Q&A, there will be some drinks and there's one other thing we're going to show you, but we'll save that until later. So thank you if you go through to the other room.