Hill & Smith PLC (HILS) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Hill & Smith Composite event. I'm Alan Giddins, Executive Chairman of Hill & Smith, and I'm here together with Shane Weyant, Chairman and CEO of Creative Composites Group, Dustin Troutman, marketing and product development head and Perci Fungaroli, Chief Financial Officer. And a big thank you to all 3 of them because actually they've come over and actually an incredibly busy time of year. So thank you. I'm also here with Hannah Nichols, Chief Financial Officer of Hill & Smith and 2 of our Executive Board members, Joel Whitehouse, Group Head of Corporate Development and Hooman Javvi, Group President. In terms of the agenda, I'm going to start by giving a brief update on the group and the increasing importance of the U.S. and then put composites within the context of our fast-growing Engineered Solutions division. I'm then going to pass over to Shane and Dustin to talk about the composites market where we sit within that market and then specifically look at the technologies we use, but also translate that into a number of case study examples. I will then give a short wrap up before opening up for Q&A. Once the presentation is over, it would be great if everyone would join us for a drink at the end of the back of the auditorium. As a reminder, these are the key building blocks that support the Hill & Smith investment case. First, it is about exposure to infrastructure spend, both in the U.K. and U.S. as governments seek to upgrade the quality of their national infrastructure, to support economic growth. Specifically, in the U.S., our businesses are benefiting from the IIJA, which was the bipartisan infrastructure bill introduced in 2021, onshoring of manufacturing and investment in technology in the form, for example, of data centers, semiconductor and EV plants. We see this as a 10- to 20-year megatrend for which we are only just starting to see the benefit of it within our U.S. businesses. It is then about market leadership in the niches in which we operate, allowing us to enjoy high barriers to entry and, therefore, strong operating margins. We do not want to be competing against commoditized players. Sustainability is core to our business model in terms of both how we operate and the products we manufacture. And Dustin will talk more about that in the context of composites. Critically, it is about an autonomous business model which encourages and supports an entrepreneurial culture with our operating companies. Our head office is there to ensure we have the right KPIs and controls, but it's also there to support the setting of the ambition for each operating company and as a result, ensure each business we own delivers to its full potential. And finally, it is about ensuring we maintain a strong balance sheet capable of supporting organic growth while also allowing us to deliver on our M&A strategy. We see significant opportunities to use M&A to help us expand into new customers, new end markets and new technologies. Effective delivery of our M&A strategy is about ensuring that our group M&A team works hand in glove with our MDs to source opportunities, build relationships with owner managers and then it's for our in-house team to have great execution and great post-acquisition integration. In terms of the shape of the group, we operate across 3 divisions. Engineered Solutions, which I'm going to talk more about, Galvanizing where we're providing a value enhancing service to our customers to help prolong the life of steel products and where we have a market-leading business in the U.S. in terms of financial performance metrics, and we are the #2 market participant in the U.K. And Roads & Security where we supply a range of products principally into the roads and highways markets in the U.K. and U.S. while also having a number of niche businesses operating across a range of security end markets. As you can see on this slide, the U.S. has become an increasingly important part of our business since 2018. The evolution of the group can be seen in the pie charts on the right-hand side of this slide. In 2018, the U.S. was 35% of sales, and 51% of profits compared to today where it is 56% of sales and 73% of the group's profits. For me, what is particularly impressive is the fact that this strong growth has been spread across almost all of our U.S. businesses with no particular weighting to 1 end customer or state. Turning to our Engineered Solutions division, which today is the largest and fastest-growing division within the group. The division has delivered a 7% organic sales CAGR over the last 5 years and a 22% organic operating profit CAGR. In the bottom pie chart, you can see that the division has grown operating profit from 23% of group profits to 50%. While also seeing a doubling of operating profit margins from 8% to 16%, of which Composites has been one of the key drivers. In H1 of this year, of the 50% of group profit that was represented by the Engineered Support Solutions division, 83% was generated in the U.S. The 2 most material drivers of this growth have been our BNS Utilities business which serves the transmission and distribution markets, and we're investing significant CapEx in expanding our facilities. And our composites business, which you will see from the pie chart represents 40% of the division's total revenue. Turning to Creative Composites. Shane joined Hill & Smith in 2008 as part of our acquisition of Creative Pultrusion a business which Perci's father actually started. Together with Dustin and Perci, Shane has been the architect of our composite strategy as well as driving our M&A agenda. Most recently with the acquisitions of Enduro Composites in February 2023. And then 2 weeks ago, the acquisition of United Fiber Glass. He is without doubt one of the best-known practitioners within the composites industry in the U.S. and sits on the Board of the American Composites Manufacturers Association. Before I pass it over to Shane to talk through this incredibly exciting part of our group, we're going to play a short video. [Presentation]

Wow, what a great video to illustrate the creative Composites group, Alan, thank you for the introduction and the invitation today. Good afternoon, and I would like to thank each of you for allowing me to present about our creative Composites group today. I am Shane Weyant, the Chairman and CEO of Creative Composites Group, which is located in the U.S.A. I have been with the group since June of 1989 and started out in a sales and marketing role, which I participated for 15 years in that role of my career. The past 20 years, I have been running the business and have orchestrated our acquisition portfolio since 2016 and with my business colleague, Ben Griffiths of Hill & Smith. Along with my colleague, Dustin Troutman, we were the developers in positioning our group from a commodity supplier to a supplier of highly engineered composite systems and solutions, which have been instrumental in our growth. Also, I want to emphasize the support received by Hill & Smith over the past 15 years to allow us to accomplish our achievements. Thank you, Hill & Smith. Today, I will highlight on the growth journey and help educate you each on the composite solutions that we provide. At this time, I'd like to highlight the Creative Composites Group, which is the largest manufacturer of infrastructure composites in North America. I want to stress how amazing the growth has been, which no one can imagine, not even myself. Our group is comprised of over 550 full-time employees at 7 sites and approximately 40 technical engineers. We trade in every U.S. state. Since the acquisition of Creative Pultrusions in 2008, we have acquired 6 additional business to advance our manufacturing, design and product offering capabilities while enhancing our purchasing power with volume. These 6 businesses have over 300 years of experience, which goes hand in hand with Hill & Smith's overall longevity since Hill & Smith will be celebrating its 200th anniversary in 2024. Congratulations. I am extremely proud to be the leader of the group which was a long-term ambition of mine to develop a composite group like CCG when I initially started my sales career by understanding the great potential that composites would offer to utilize material sciences through pultrusion infusion, molding, hand layup, shop spray and filament winding, manufacturing capabilities that we have to offer, develop products and solve solutions with Composites. Our group is represented by Creative Pultrusions. E.T. Techtonics, which was acquired in 2016, and Kenway Composites and Tower Tech, which were acquired in 2017, Composite Advantage acquired in 2018. And as Alan recently mentioned, Enduro Composites acquired earlier this year and most recently, United Fiberglass. Overall, our Creative Composites Group has been assembled through a series of acquisitions over the last decade. As you will see throughout the presentation today, our group has a strong position in key manufacturing processes to serve strategic end markets that allows us diversification potential to grow the business for many years to come. Our marketing position confirms this with our emphasis on engineered systems and various features and benefits that allows us to provide our customers with optimal solutions to solve their complex and challenging needs. Our margins are well above the Hill & Smith group averages. Over the past 5-year period, with a compound annual growth rate between 9% on organic revenue growth and operating profits of 31%. Each of these acquisitions have expanded our manufacturing and product offerings into additional segments. Note, each of these businesses were bought outside a formal purchase process based on the close relationships I had with each of them. I would like to expand upon the recent acquisition of United Fiberglass. Since I've spent the past few weeks focusing on this acquisition, which is located in Springfield, Ohio, which is 30 minutes from our Composite Advantage business in Dayton, Ohio. This is a business like other acquisitions that I've had a long-standing relationship with Kevin Barnett, the CEO and his team. We have known the business very well and actually had a successful trading relationship and fits our growth model very well with engineered systems and solutions with its composite conduit and bridge drainage systems associated in the infrastructure. There are significant hard and soft synergies through the acquisition of United Fiberglass with collaboration across marketing and sales, engineering and purchasing. The excitement is very strong, and the overall integration of United fiberglass is going very well. And the company has a very talented and experienced CEO to help our group become even stronger moving forward. As Alan did mention, the acquisition pipeline is strong going into next year. Overall, we are facing very exciting times in today's composites markets. which will help elevate Hill & Smith's overall performance moving forward. The global composite market size was estimated this year at USD 30 billion in North America alone. The growth is attributed to the rising demand for lightweight structures and components in various infrastructure sectors, which is anticipated to support the market growth during the next 10 years. You may ask, why is Creative Composites Group, the market leader? The reasons are many on how we have become the #1 player in the industry. We offer technical knowledge, hands down. We are the market leader in the design, engineering and manufacturing capabilities of complex solutions that utilize state-of-the-art material science. We have the experience. As stated before, we have over 300 years of experience with the 7 companies, which elevates our overall expertise with a proven history of successful projects across the world. We are the first movers, always taking the lead position with innovation to work with our composites and customers to provide proven solutions to introduce new products and solutions. We have the complete package. No other competitor can match our capabilities, with various manufacturing processes to provide overall satisfaction to our customer base. And lastly, we have the proven leadership team, years of teamwork, problem solving and overall performance speak for itself with our leadership team with proven results. I have had the privilege to lead and been blessed to work beside our core leadership group the past 20 years, while expanding this leadership team with the additional top talent during our strategic acquisitions the past 7 years to help continue our growth stronger moving forward. These 5 core attributes help our CCG team to deliver a highly differentiated and value-added engineered solutions. With our superior customer service, resulting with long-standing loyal customer base. At this time, I would like to expand upon some of the major benefits associated with composites to educate the group. Lightweight, Composites are 80% less than steel and 30% less than aluminum in weight. This equates to safer, ease of handling to install with overall cost savings. Extreme Strength, pound for pound stronger than other steel materials with a very high tensile strength. Allowing enhanced design potentials such as bridge decks and access platforms. Corrosion-resistant and durability, Composites will not rust, spall or rot as traditional materials with long-term performance and maintenance savings by lasting 100 years with minimum maintenance while withstanding very harsh environments. Flexible design and ease of fabrication, engineered to meet the toughest challenges. And the exact application requirements for quick and very easy to assemble with your most common tools. This means that composites are cost effective, which lowers the overall life cycle costs for end users. Lower environmental impact, composites do not leach into the environment like wood coated creosote materials. This means longer lifespans with reduced emissions versus traditional materials. Overall, a green product based on the manufacturing and environmental factors, which equates to very safe manufacturing techniques. Our markets are underpinned by long-term structural growth factors. I will take you through these 4 key drivers. In the top left-hand corner, substitution of composites continues to be the key driver overall versus traditional materials since composites is the material of choice for sustainable construction. Composites are excellent in extreme weather conditions since they deliver overall resilience and longevity versus alternate materials. The increased demand for our utility products due to wood shortages and this demand is forecasted to continue over the next decade. As inflation continues, the price difference between composites and alternate materials decrease. Plus, with the acceptance of composites with standards being developed, so engineers can design more effectively with composites in various industries and elevated success in highly visible projects. In your top right-hand corner, U.S. government stimulus funding continues to help drive growth in various infrastructure projects. With the support of the IIJA funding, which totals $550 billion of new federal funded availability through 2027. Other important investment opportunities such as the Inflation Reduction Act, to support the electrical infrastructure with clean energy along with the aging U.S. infrastructure that needs replaced or maintained. And composites is the clear material of choice sent by utilizing material science. I want to emphasize, we are only just seeing the benefit of the IIJA stimulus funding in several sectors, this will only get stronger as we move forward. In the bottom left-hand corner, U.S. GDP growth is the fastest-growing country in the G7, which is forecasted to grow 10% through 2028. While the U.S. population has grown 7% over the past 10 years, this population growth trend is expected to continue forward, driving the need for additional infrastructure investment. In the bottom right-hand corner, we expect to gain further market share, which has been a key part of our organic growth in recent years. Along with the support from Hill & Smith on strategic acquisitions, we continue to expand our addressable markets with the development of new applications and products, plus the adoption of engineering standards to effectively utilize composites, such as the LRFD design standard. This will only elevate the emphasis of composite materials acceptance by our engineering community, in key infrastructure applications. This is one of the most important slides in the presentation. We are exposed to growing markets, but critically, the total market we serve is enormous. While composites adoption is still in its early stages. The substitution effect we referred to previously, will drive growth for many decades to come. Utilities and electrical sector has the highest growth potential, which is estimated well over 10%. Waterfront and access structures, these sectors have growth potential between an estimate 8% to 10%. And CCG has various product offerings for diversification in these 3 market segments. Also, we offer excellent engineering and installation support to service these segments to support our customer base over our competition. OEM, wastewater, cooling towers and building products have a very good growth potential, which is estimated between 3% and 7%. Likewise, CCG has various product offerings for overall diversification. While these segments are not as fast growing as the top 3 segments, they offer steady growth cycles, which will continue in the future. In closing, I want to reemphasize our key points from my presentation today. We have a proven leadership team that has significant experience, along with our strong customer relationships across many market segments. These 2 critical strengths combined with our diversified manufacturing capabilities, product offerings, market innovation and technical leadership, making us the supplier of choice. This provides a significant growth potential through market share gains in various markets and with our vast manufacturing capabilities and capacity to satisfy our continued returns profile. Once again, thank you for your time and consideration to allow me to present to each of you today. At this time, I would like to call my business colleague and friend, Dustin Troutman.

Thank you, Shane. Good afternoon, everyone. As Shane indicated, my name is Dustin Troutman, I'm the Corporate Director of Marketing and Product Development for the Creative Composites Group. I started 28 years ago with Creative Pultrusion one of the first companies, the first company that Hill & Smith acquired. Today, I direct marketing and product development. Prior to entering my career with the CCG, I cut my teeth in the electrical infrastructure and highway construction industry, actually building and managing the construction of highways and power lines. So it's been a good fit, considering we're focused on the infrastructure markets. I'm going to talk about our manufacturing processes. I'm going to mainly talk about 3, although we have many, the CCG has served with various composite manufacturing methods in which we utilize to provide our customers with highly engineered composite solutions. Each product is custom engineered to meet product and industry specifications. Pultrusion, molding and filament winding are the processes that produce the majority of our finished products and revenue generation. Pultrusion, a continuous manufacturing process is ideal for the manufacture of high-volume constant cross-section profiles. We do have some samples with us today. I would encourage you to look at those samples. Molding generates large 3-dimensional FRP products. Filament winding, a process in which reinforcements are wound over annual and saturated with a resin produces conduit and pipe. United Fiberglass, as Shane mentioned, our most recent acquisition, produces their products via the filament wound method. Let's take a deeper dive into the pultrusion process. Reinforcement fibers are saturated with the thermal set resin, while they are being guided into a heated die where the resin cures in a continuous process. The cured cross-section that took the shape of the die, enters the cut-off saw where it's cut to length and prepared for shipment or to another station where additional value is added through fabrication. To put things into perspective, a large pultrusion machine, the entire setup, fiberglass in-feed or the carbon in-feed as well as the cut-off saw. So we'll take up at least 2 of these rooms and about half the with, just to put that schematic into perspective. A large custom manufactured pultrusion production line requires an investment of about $1.5 million. Payback on the investment happens in 2 years or less. CCG is in the process of commissioning 2 additional large pultrusion machines. Those machines are going to be used to support our existing and future demands. The molding process requires the manufacturer of custom molds that have been engineered and designed specific to the end product. Engineering is a common theme here. The fiber architecture, volume fractions, ply angles, thickness are all predetermined during the structural engineering process. That process dictates those fiber architectures based on the strength and stiffness requirements of the end product. These engineering functions are all performed in-house by our talented engineering staff. We have very sophisticated software that we actually utilize in order to optimize the finished product. The molding process begins when fibers are stacked in the mold, the mold is sealed off and a vacuum is poured on the mold while the resin is drawn into the mold, displacing the air and wetting out the reinforcement. The resin is allowed to cure for several hours after which the product is pulled from the mold. I'm going to discuss three case studies centered around 3 of our current customers, but first, a few words on our markets. The CCG serves a broad range of markets where lightweight corrosion resistance and high-strength attributes are critical for the long-term performance. These products are heavily geared towards infrastructure applications in which long-lasting engineered solutions are required. The photograph is one of our power poles. This is a pultruded pole. There's a sample in the back of the room. You get time, please go back and have a look at it. There's a few things I would like to point out about it. The lines that you see on top of the pole are considered conductors. They're the main electrical conductors that transport distribution voltage. The lines that are underneath that are what we call secondary electrification lines. They take the electricity into your home. The lines below that are communication lines. It's not unusual to have joint use on our poles. So therefore, the power company has a role as well as the communication company in the poles. I'd like to point out that there is a wooden pole, this photograph was taken during the construction. So the lines haven't been fully tied in, and they did let a stub wood pole there. Phil, Bruce brick, one of Versant Power's transmission and distribution engineers had several problems that they needed to solve. So they had 5 major weather events in the last 10 years. resulting in major power outages. Their customers weren't happy neither was the Public Utility Commission. Bruce's Power Company needed a more resilient grid. An aging electrical infrastructure, which is very common throughout the United States. Compounded with woodpecker damages -- wood poles led to the premature failures of the poles. They are woodpeckers. Believe it or not, woodpeckers play havoc on the wood poles used throughout the United States. In fact, we love woodpeckers. We wish there was more of them. I've got to add this. It's not unusual for utilities to let a wood pull stub in order to house woodpeckers from an environmental standpoint. So we are displacing some of the homes of the woodpeckers. CCG Engineers work with Bruce and his team to come up with solutions centered around storm strong filtrated poles, working with engineers and balls discussing the code, discussing their requirements, determining what type of loads are going to be on their lines and then helping them pick exactly, which pool they need for their application. Today, CCG supplies pultrutive poles to Versant Power for Sun Power is in Maine. The poles are installed in woodpecker prone areas and are substituted for wood poles on critical structures, enhancing Versant Power's grid resiliency. And another example, and this example is on the West Coast. In order to build grid resiliency, a company by name of Southern California that you've probably seen them in the news, had major issues with wildfire fires and they continue to do so. They're heavily funded to combat wildfires. Our pole is part of that solution. They came to us, and they said, "Look, you got to help us out." Can you guys come up with a solution, something that will survive these wildfires. Okay, what's the threat level? Well, we need 3 minutes and 1,000 degrees Celsius or slightly more. That's bordering on a hydrocarbon fire. So our engineering team, we looked at the technology we had. We looked at the technology we need to acquire through experimentation and we developed a solution. In the back of the room is a pole that will survive a 3-minute wildfire event at 2,100 or 1,000 degrees centigrade, 2,100 degrees Fahrenheit. That pole is unique. The customer also said, hey, we want that pole to maintain 100% of its design strength so we can reenergize right after a fire. They also said, we would like you to approve that. Okay. So we came up with the technology. We invented sensors in that pole to continuously monitor the temperature of the poll during a fire event. If the temperature exceeds more than 400 degrees internal to that pole, then the pole was replaced. If the temperature was less than 400 degrees, the pole can remain in service, and it maintains 100% of its original design strength. That's the technology and the technology is patented. By all means, please check it out. It's in the back of the room. A fact that I wanted to point out the U.S. has sustained $348 billion weather and climate disasters since 1980. It started with Hurricane Katrina that I can remember, and there's been a lot of major storms that have wiped out a lot of infrastructure throughout the United States. In another case study, the United States Army Corps of Engineers, this task with the engineering, construction and maintenance of the majority of the levies, dams, locks and navigable waterways throughout the U.S.A. They needed a low maintenance, long-lasting solution for the next-generation wicket gate. The photograph is of a wicket gate. The current design is prone to rot because the current design is made of Oak. CCG engineers work directly with the Corps' Engineering Staff to design a composite solution wicket gate. Wicket gate, again, as seen in the photo, control the water levels necessary for navigation of commercial vessels and inland waterways throughout the United States. In the summertime, the river decreases in depth, the wicket gates are raised. It elevates the water level, so they can get barges and boats through not unlike the river that I just looked at. To date, 100 units have been manufactured by the Creative Composites Group, and I'm happy to announce we recently received an additional order for 100 more units. We anticipate the future is going to be strong with the production of more wicket gates. Based on the attributes of Composite Materials, the course has made the decision to begin transitioning to FRP structures in lieu of corrosion prone steel and wood structures where it makes the most sense. In fact, the core estimates that it can save 10x more money over a 100-year design life by integrating composites into their structure. There's a lot of places that traditional materials will work fine, but there's a lot of places where composites will play a better role. CCG has achieved expert adviser status. That's always the status we want to get with engineering firms and our customers. We want them to pick up the phone when I have a question and ask creative the creative Composites group. In fact, we recently hosted a meeting with the Army Corps of Engineers, where they brought 30 of their engineers and management team into our facility in Ohio. During that event, we taught the engineers about composites. We taught them how to manufacture composites, so they would have an understanding of the product they were receiving. We taught them what type of quality control procedures they should put in place to protect them and to manufacture. We also talked to them about maintenance and writing the maintenance manuals for the future. In addition, we talked about other product lines that we are jointly developing with the Army Corps of Engineers. The Delaware joint toll bridge had a problem, the Northampton Street Bridge. If you look at the bird's eye view of the bridge, that bridge is 125 years old. It spans 170 meters and needed sidewalks because it serves 2 communities across the river, one in Pennsylvania, one in New Jersey. The original bridge was not designed with sidewalks and being 125 years old, it was not designed to take a substantial deadload while still being able to maintain the traffic rating of the bridge. CCG engineered a composite sidewalk system that eliminated the weight issue, permitting the construction of adjacent sidewalks, connecting the communities. What you're seeing are composite side walks that were prefabricated and shipped to the job site to satisfy all the requirements of our client, mainly the weight issue. The prefabricated sidewalk structures reduce the installation time from months to weeks. And actually, if you pour concrete, it takes time for concrete to set up. normal concrete is 27 days. Our stuff is prefabricated can be set in place rather fast. An interesting statistic, 42% of all bridges in the U.S. are over 50 years old. I know that doesn't sound old to you guys and 7.5% are considered structurally deficient. Moving on to environmental and sustainable products, Shane mentioned compositor green. Composite Materials offer sustainable infrastructure solutions. Composites will not leach, dangerous preservatives into the soil or water. Most wood poles in the United States are, in fact, treated with pentachlorophenol, and they have a tendency to leach dangerous chemicals into the environment. In the last few years, the EPA has actually outlawed pentachlorophenol because of that. The state of New Jersey outlawed the use of treated wood piles located in and around shell fisheries. Today, many old woodpiles are being replaced with new FRP poles that are pultruded. They will last many years and they will not leach into the environment. And another example, FRP utility poles are estimated to last 2 to 3 times longer than a typical wood pole. A wood pole could last 2 years, wood pole could last 80, but on average, it's about 40 years depending on where that pool is located in the United States. We anticipate that pole's going to last 2 to 3 times longer. And again, we're not going to leach any dangerous chemicals into the soil or waterways. When I talked about Versant Power, one of the reasons they use our poles is because of the critical water resources. If there's a pole that's going to be placed within -- within 100 meters of a well or a water source, one of our composite poles go in there because it's not going to leach. CCG is leading a major effort to decarbonize and recycle. I'm excited about this. We know we need this for a circular economy. We're taking the steps to successfully develop a system. We have successfully recycled a Pultruded utility pole, reclaiming the fibers and the resin. The fibers are resized, resize means there's a special chemistry applied to it, so we can use it back into our process. So they can be pultruded again and reutilized into a new product. We plan to begin recycling our waste in 2024. I appreciate your time. I will say I've never been as excited like Shane has to be a part of the composites industry, right? I mentioned I've been here 28 years. I've served the role as product development and engineering. And I can tell you that we have the manufacturing capabilities, we have the engineering talent, we have all the resources necessary to continue to grow the business. And as Shane demonstrated the money is there. So I see no reason why we're not going to continue to grow the way we've described in the next 10 to 20 years. Thank you. Alan.

Great. Thanks, Dustin. To recap, over the last 15 years, Hill & Smith has built a market-leading business in Creative Composites group. It is a business with fantastic momentum, benefiting from the long-term drivers of infrastructure spend and material substitution. It is also led by a first-class management team. It is this combination of market share growth, market expansion and management capability which I believe will allow the business to deliver industry-leading returns. M&A also provides CCG with the opportunity to enter new markets and introduce new technologies into the group. Enduro Composites and United Fiberglass are both excellent examples of Shane and his team's ability to source off-market deals and of the group's ability to then effectively execute these transactions while retaining the support of the incumbent management teams. Finally, as Dustin has articulated, the sustainability case for composites is strong. Turning to our financial framework, which we set out with our 2022 results. This is built around delivering 5% to 7% organic growth, supported by 2 to 4 acquisitions a year with an aggregate EV of GBP 50 million to GBP 70 million to give a total revenue growth of 10% plus. We set a target for operating margins of 15% by the end of 2024, necessitating a 170 basis point expansion on our 2022 reported margins of 13.3%. I'm pleased to say that we have already materially progressed towards delivery on this target. Return on invested capital, we have an 18% plus, against which we delivered 21.3% in H1 this year. Cash conversion at 80% plus is a number which the group has consistently delivered against and allows us to deliver our strategic plan while keeping our gearing level well below 1x. Turning then to the performance of Engineered Solutions. As you will have seen from the earlier slides, the division has consistently beaten all of our group metrics, reflecting the strong market positions and low capital intensity of our businesses. Amongst this group, composites has been the standout performer and has the potential to materially outperform in the medium and longer term. Turning to outlook for Hill & Smith. As you will have seen from the trading update on the 14th of November, we have continued to see positive trading following an extremely strong H1. Our U.S. infrastructure spend looks well set for 2024 and beyond. We see this as a medium and longer-term megatrend. By operating within niche markets, this allows us to enjoy high barriers to entry strong customer relationships and attractive operating margins. Many of our products have strong sustainability credentials and this is something which our customers, both in the U.K. and the U.S. are increasingly focused on. Finally, I think over the last 18 months, we have shown our ability to use M&A to enhance our growth. And we're entering 2024 with a very strong pipeline of opportunities. So I feel very positive about the outlook for the group. And I think we have in Creative Composites group, an outstanding business facing into a very exciting, very high-growth market. So with that, I'm going to now open up for questions perhaps Shane and Dustin, you would come up here and we will share the answers.

[ Don McComy from Numis. ] Two if I may. Firstly, can you explain a little bit on the M&A opportunities for specifically, what the strategic priorities are there and maybe the sort of expected cadence? And secondly, given the multiple tailwinds. Is it fair to expect that 9% sales CAGR to be maintained or perhaps even accelerate?

All right. Well, I'll touch on the M&A and then I'll pass over to Shane. So I think me, I think what we've demonstrated, I mean right back going to when we first bought Creation, but I think particularly with Enduro and United, the benefit of the structure of CCG today, the ability to integrate, leverage sales, marketing, procurement, is pretty fantastic. So we look at the impact we can have on growth in year 1, year 2 in those business is pretty significant. So if I look at our pipeline, we've got a very good pipeline across all of our businesses. I would be disappointed, Shane probably very disappointed, if we didn't do at least one more deal in composites in the next 12 months. So we might do more, but I certainly would feel pretty confident we will do at least one more deal. Shane, do you want to talk about the focus of where we would want to do that and then come on to is 9% cautious or ambitious.

Focus, our playground is infrastructure. That's where we succeed. And as we presented today, there's a lot, a lot of potential in the U.S. for infrastructure. So when we look at opportunities, we try to find other composites group that has those product lines that can deliver to that playground, okay? And where we can complement each other. 9%, I think, is conservative. But I've always been in sales and was taught by Perci's father to Aim bid except during budget seats.

Just 3 questions, if I may. The first one is around kind of barriers to entry into your industry and the kind of IP that you have within the groups. And that's both from a product because you mentioned firestorm is patented. But I was wondering, are there any other products that are patented and how strong those protections are, but also which processes have the most kind of technical know-how, technical barriers to stop competitors kind of coming in and competing with you strongly. Shall I do them individually.

Yes. Well, have you got a third one.

That was number one.

We're doing an individual. All right. Dustin why don't you touch on patent processes intellectual property.

Yes, sure. We have many patents. Some of the patents are owned by the Creative Composites group, some are jointly owned. The reason they're jointly owned is a lot of times, we combine forces with our customers to develop products specifically for them. that would be more on the OEM side of the business. Now barriers to entry. You heard us say many times today about the amount of engineers that we employ. That's probably the biggest barrier to entry is having the engineering talent that not only understands how to manufacture the products, but probably more importantly, how to engineer them and engineer them in such a way that they can to manufacture. I can tell you that from the Pultrusion side of the business, there's things that we do that other people have not been able to replicate. They have failed. Some -- for example, I'm not going to mention name, but some of our competitors have tried to get into the pole business. They see our successes. They have failed to be able to do that.

That kind of leads on to my second question, which was around the technical sale of these products is not -- they're not off the shelf. It's -- as you say, it's a solution. So there's quite a bit of integration between the sales and engineering kind of proposition there. Have you got the right current capability? And what are your plans to kind of develop that capability internally? And are there any processes or practices from other groups that you've acquired that you can then kind of share best practice?

Yes. So I look after sales as well. So one of the reasons we're successful again is on the engineering talent. And that engineering talent is not only on the design side, but it's also on the sales side. We employ some engineers that are, in fact, on the sales side. We have a very good sales support, technical network that's internal when the phone rings, our sales guys pick up the phone if there's a technical question. We have a staff of 3 engineers that answer those questions every day and help our customers design our products into their systems.

Great. Third question is maybe more for Alan. Given some of the growth drivers that this business is presenting in the U.S., are there any plans? Or could you do this or replicate this in the U.K. or in Europe.

I think the key, Tom, is I think our model is that it's absolute best when you are focused on your best management team, best markets. And I think when I listened to Shane, which I do all the time. Well, listen to the opportunity in the U.S. that is absolutely enormous. So I think, yes, could we go and move into other geographies, I'm sure we could. And maybe if you go down the medium to long term, that might be right for our business. But today, the market opportunity is right on our doorstep in the U.S., and it's all about focusing behind our best guys, putting our CapEx behind that, M&A behind that. And honestly, the opportunity is so big. I don't think we need the distraction of another geography.

Andy Brown here. Just on the -- just on that sort of sales process, do you have an order book as such? And how much visibility does it give you? And then just to the commodity point you made at the outset, I mean -- hope that doesn't sound rude. It does sound like some of your products are just up against the commodity angle? So the pricing differential and how you sort of work that, please?

Yes. So we do have order books that is about 3 months visibility. But our pipeline would be going right out into -- our pipeline is about $300 million. It has grown every month this year. As Alan has said, within the whole composite CCG Group. But we've seen, we track that monthly, okay, but the pipeline continues to grow.

And naturally, the products and the projects we're working on a per or into your perm. So we're involved early on. So that's quite the long cycle time that happens. So we're very much aware [indiscernible] coming down the road.

And Dustin, in terms of the point around sort of what part of our revenue would you sort of put in a more commoditized end or have we sort of evolved completely out of that.

We made some structural profiles. There's a lot of being in the back [indiscernible] being considered or commoditized. But that profile is even -- that profile is even unique. It's got special fabrics in it that make it more stiff and stronger than our competitors. Although it's a commodity, it's different than what you would normally see in the industry. We've really stepped away from the commodity business. And we really focus on unique solutions. I didn't mention a whole lot on the resin side, but there's a lot of unique things we do on the resin side. That's why we were able to realize that pole, so we try to continue to promote these special resins, fiber architecture needs engineered systems and stay away from the commoditized business just because of the margins.

I would say that breakdown is about 20% commodity, 80% more the highly engineered systems and solutions. And Dustin and I started that in year 2000, when I was in sales and marketing to start that transition even before Hill & Smith, to get away from the commodity products to highly engineered systems and solutions. I mean -- and we're in a good space. We invest a lot in engineering and being able to engineer those projects to satisfy the customers' needs. A lot of our competition even suppliers have really restricted that capability. And I think that puts us in a whole new leg our capabilities of that engineering talent.

Rob Chantry from Berenberg. Three questions from me. Firstly, just on the broader market structure. I'd just be interested, given you guys have been in the industry 20, 30 years. Why isn't consolidation happen more quickly? Like it seems like everything you talked about today is so positive infrastructure, drivers, assets, returns, everything. And it's also it's so fragmented with these assets. So firstly, why hasn't it happened more quickly. I do it one at a time, it's easier.

All right. I'll touch on that. Standards, which [ Dustin ] -- composites didn't have standards, okay? Wood, concrete, steel, have hand in books, design standards. So just recently, in the pultrusion industry, took about 20, 25 years. I remember raising the funds to be able to put funds towards an LRFD standard for our industry. That just took place in the past year. So the lack of standards to our engineering community from a design factor, that's been the problem. But those things are being overcome.

And second question, on Slide 17, you show the key competitor set basically by end market, whether it's kind of waterfront or utilities, et cetera. And basically, every subsector has a different competitor. What I knew you guys are saying that the 10 year end markets? Why is a larger related to the first one. Why is a larger competitor not kind of emerge to target those, while you also focused on such niche areas? Sorry if I just misread the job.

A lot of our competition is focused in one area. We have a lot of pultruters that may just do window profile okay? They basically integrate the technology from within. So like Apella windows, Anderson windows. One of the biggest markets ever for fiberglass was ladder rails, okay? The step ladders in the U.S. for the electrical, also the building products. A lot of those companies have vertically integrated. So those are the commodity profiles. So once again, the engineering capability. A lot of our competition do not have civil engineers to be able not only design with composites but also for example, in the water market, the marine market, the geotechnical side, because you have to understand both areas of engineering. So a lot of those areas is because of the engineering talent and the lack of it by our competition.

I can add to that. Shane mentioned the Waterfront side of the business. We have several engineers there that actually have some pretty sophisticated software programs. We actually will simulate a large vessel impacting a fender system for instance, a bridge across the river out here. If we wanted to protect that bridge abutment, which they do in the U.S. quite extensively naturally, we design those fender systems. Not a lot of engineering firms understand how to design those engineering firms out of nontraditional materials on construction, right? So we have a material that's going to not corrode in saltwater. We also have a material that will absorb 10x more impact energy than steel. When you look at the area and the low displacement curve, whenever you're putting a load on not to get too technical. But there's some attributes of composites other than corrosion resistance lightweight, and it's how they absorb those loads and they take that energy and we create what we call it work energy, and we absorbed that impact of that vessel to protect that asset. But in summary, we have the engineering talent in order to do that. Our competitors do not. They would have to go to an engineering firm, give them the information. We do it all in-house. Our customers want to finish solution. They don't want to go through the pain of having to connect all the dots, right? They want to order a fender system that's fully designed and they know it's going to work.

So that's a great answer. Third is product substitution. So if you look at the building products sector in Europe, you have businesses like Genie, et cetera, they've been talking about product substitution of legacy pipes, et cetera, in the U.K. and [ Wagon Mali's ] all these businesses for years. The question is basically, to what extent is the substitution of legacy materials in the U.S. behind Europe or behind the U.K.? Or is it actually ahead?

If I understood the question correctly. The substitution of materials, I'll use the utility industry. 25 years ago, we made the first composite poles. Within the last 5 years, it really took off. Some of it's codes and standards because the industry has created the codes and the standards necessary. But that early adoption has really taking place right now in the U.S. because of a major wood pole shortage. There's a major catalyst behind it. We want to decarbonize. We want to plug all these electric vehicles in, but we do not have the power grid. It's not nearly ready to be able to accept that type of demand. So there's a lot of major utilities that have ignored the construction and the rehab of their grid. So a lot of that is happening right now. We also have a 5G network that's being built out, which requires poles as well. So we got the 5G network. We have decarbonization. Everybody wants to plug everything in. They want to do away with fossil fuels. That is producing a lot of demand. So there's not enough wood poles because the wood pole industry did not manage their industry to be able to supply that many poles. The other thing is they want a stronger grid. So they need stronger poles. Traditionally, a Class 1 pole was utilized to build the majority of our distribution grid. Today, they use a Class 1 pole, Class 1 being stronger than a Class 3. So composites are extremely high strength, as Shane pointed out earlier on. So that's one of the reasons there's a fast adoption right now. They really have no other choice. They have to use a substitution because they can't get the wood. Hope I answered your question.

Joseph Spooner from HSBC. Just kind of following on from that, when there are opportunities to use composites as a substitute material. What's the kind of pushback you get from the engineering community as to why they won't go down that route? I think you spoke about a cost gap needing to close. Is that part of the reason? And then can you give us a sense of what that cost gap may be?

Yes. It usually comes down to the cost gap right? I mean our materials tend to be more expensive than legacy materials of construction. Shane and I, we were both in sales throughout our careers. We learned that if we could check at least -- if we could check 3 of the boxes, great. Lightweight, corrosion resistance, excellent dielectric strength, you're probably going to make the sale. You've been able to overcome some of those price obstacles. If you can check 2 of the boxes, it might be a little bit envy. But being able to look past the initial cost and convince the engineer, and the engineer has a convinces management group to allow him to spend more money or more money upfront in order to build for the future. That's very important. I mean it's one of the questions I ask the utilities when I'm working with the end units, who all is involved in your decision process? Are you willing to spend more money upfront in order to have to spend money later on in maintenance and that type of thing. So that's how we typically overcome that price obstacle. Sometimes you can't do it. It's just not a fit.

In today's world, labor is critical. So we're starting to see a lot of agencies in the mass transit area. They don't have the labor to service a lot of their networks. So they're looking to composites for that longevity and to eliminate maintenance. So we're seeing a big push, which probably 15 years ago, we did a lot with our sister company over here on platforms. This past year, Perci can probably tell you that market took us since 2014 to develop it, but we probably shipped about $30 million worth of platforms just in the Northeast sector of the United States the past 2 years. So there's things like that where people are looking at maintenance savings, installations and they're putting that life cycle cost factor as more of an importance to make a final decision, to use our materials over traditional mate.

Okay. And just a follow-on, if I can, on the M&A. When you buy these businesses, they're obviously very kind of niche in terms of their focus. To what degree can you actually integrate those businesses once they join the group?

Well, I think compared to where we were probably 2 years ago, not as well compared to where we are today, exceptionally well because I think the change Shane is made to the setup with CCC, makes that whole integration far better. But Shane, do you want to just talk about how you evolve the group?

Well, during the M&A process, it's kind of like being a sales but. You knock on the door, you have the target area, you start understanding who's behind that door? What does that owner want? So Ben and I have been successful to understand their needs. And then you get it through the letter of intent or heads of term and then you start to do diligence process. So as Alan said, we've integrated a process. A lot of our target accounts that we target to acquire, we walk in. The #1 concern, how is this going to affect my people? So you got to develop that trust factor and that was one of the big things that I always play to make sure that owner knows that Hill & Smith is the group to pass it on. And then we have the integration process. Perci's group does a great job on the financial side. And that's probably the biggest pressure when we buy a company is the demand that we have to close out the month within 2 to 3 days. A lot of these companies are shell shocked when you tell them that. But we have the playbook, I always played American football, you always had a good core playbook, you practice weekly. And sometimes you had to make modifications, but you're always coaching. And it's the communication. But Ben and Joel have done a great job on a process outlining, it takes us anywhere from 90 to 120 days to integrate them not only into the CCG but also into the Hill & Smith network.

And Shane, do you want to just also talk about when companies part, how they fit into the whole strategic planning process.

Probably in 2012, we started a strategic planning process called Rockefeller habits, okay? And the creative Pultrusion group has orchestrated that since 2012. So when we bring in these new groups, it's a very simple process. But what I like about it, I've been involved in the past where you would go out have meetings offsite, have fancy dinners, make this nice 3-ring binder, put it on your top shelf and maybe pull it out the next year. Our process, we live it every day. okay? And I can tell you that. We can have a 5-year plan broken down to 3 year, 1 year, we do everything on tri-semesters, 4 months. And then we break it down to the weekly we're communicating our core priorities and rocks to move the group forward. So Ben has been involved. I remember the first meeting when Ben came over where we were bringing 3 other companies that have table to strategic plan, yes, we always strategic plan. Well, it's a simple process and the involvement and the excitement it works, okay? So we take pride into that planning process, part of the integration to bring those key team members when we acquire them to the planning process.

David Farrell from Jefferies. First question, Shane, you talked very much about CCG as a company in its own right, and it's clearly something you're very proud of growing alongside Dustin. [indiscernible] than a checkbook, what does Alan and being part of the Greater Hill & Smith provide you?

When Perci's dad decided to sell the company, I may get emotional. He said, who do you want to work for? And it was like earlier. Bob, Hill & Smith is going to take care of your people okay? And that's been a great friendship to see Bob's traditions carried on, okay? They have given us the support. They have listened and they've educated us and the friendships, when I was a sales guy, Bob said, take over the group, I've learned walking in offices each day. when people were waiting to go to dinner, I would learn from other companies. I've been able to do that to kind of be a leach on the other Hill & Smith companies and learn from them. And not only have they support us from a capital, the vision to execute that. They have supported us and educated us. On the other side, just running a company, manufacturing growing sales, but we've learned the other side of the PLC. But overall, it's a group communicating very effectively.

My second question is the analyst question and going back to Slide 17. If I look at the growth expectations across the end markets, what does that mean for margins? Are the faster-growing areas that you see such as utilities, potentially higher margin than the other areas?

I mean I think, David, which is why it's an analyst question, we don't actually give that much detail clearly about composites on a margin basis. But I think the key principle is if you look at Shane's table of the market, the margins get higher, the higher you got that table at the top is the highest growth. So I think it will be a fair assumption to assume we will see gradual margin expansion.

Melvin from Sterling. Shane, Dustin, thank you for traveling 4,000 miles to see us. When the government -- whether these contracts are from IIJA or IRA, is the government mandating the use of composites.

Actually, as Alan said, I sit on the ACMA Board. And probably for the past 10 years, we have a fly-in day to DC where we spend 3 days in Washington, educating the politicians, the committee members on composites. So it's been a long journey. Actually, we have legislation now where it specifies composites, okay? So that work, we're starting to see it. And it's been tough getting a lot of this funding out on the streets, believe it or not, because a lot of the projects haven't been developed because of lack of the engineering community. As I said, we're starting to see this and the potential is unbelievable. But the federal government has specified in a lot of projects, especially in the electrical market, the use of composites.

And when we say that we are the largest in North America, I mean, what is the market share we are talking about, 5, 7, 10, more or less?

North America, as I said, was $30 billion. But in that, you've got a lot of players in composites. You've got aerospace, you got automotive. We don't get into those factors. But in the infrastructure, I would say we have probably 10% to 15% market share, where we focus 80% of our focus.

And the last one is that going back to that competition sheet, are most of these businesses basically small family-owned and therefore, have not invested in R&D in the past, which we, as a group today can.

If you look at the 6 businesses, we have acquired 5 of the 6 were very small, family-owned making ends meet. How much I spend on here and really didn't have good design processes. So one of the things when Dustin and I took over the group in 2004, and was the established processes. I actually said to Dustin, you take over QA, take over the factory, Perci took over finance, but what we did was develop processes. I took the office and trying to design out waste, just on a piece of paper going through the office, how it's passed forward. Those are the things we instill in a lot of these companies to simplify the business.

So Shane, in terms of the competitor tires on that slide, would you categorize most of those as privately owned small to midsized businesses?

Yes.

Henry Philips from Peel Hunt. A couple from myself, please. Just in terms of the pricing premium, earlier in the presentation, you talked about how composites for carrying a premium to other materials, but that gap was narrowing because, obviously, inflation in other materials. Just I'd appreciate a slight sort of how long is a piece of string question, but just how is that gap narrowing?

Yes, I can take this one. I'm going to use the example of the utility industry in the wood pole transition to fiberglass. That gap, whenever we were selling polls 20 years ago, that gap was probably 5 to 6x -- the gap is probably 5x to 6x compared to the price of a wood pole, Today, that gap is closer to 1.5 to 2x. And depending on the species of wood we're buying and what part of the country they're located in. Southern Yellow Pine is more difficult to get right now than Douglas fir, right? So that gap has narrowed because of demand. They're having difficulty getting the wood poles. Canada struggling with wood poles as well. They have a major 5G build out at the same time the U.S. is. So there's a lot of stars that have aligned to cause this issue with being able to get wood poles, which is great for us. So we're going to capitalize on them.

And then just in terms of how far can composites go in terms of that, maybe not the $30 billion market, but the sort of $1.5 billion, your sort of slight infamous now probably Slide 17, has become the -- just how far if you like, can composites go against other materials. Are we just in its infancy and it just accelerates exponentially from here? Or is there a sort of -- are there just some processes where other materials are just superior in terms of performance and criteria? And then that sort of really leads on to the last question, which is, again, possibly not at the current time. But when you look at how galvanizing grows and what galvanizing is being used for swapping out paint, et cetera, et cetera. Is there at some point in the future, maybe even now whether there's an element of cannibalization that composite growth comes at flattening out galv demand. Am I overly complicating that proposition?

Do you want to take the first part of that, and then we specifically just Dustin let go? What is the first one? So the first one now -- was sorry, just I lost it's a long question.

How big is the potential market? And is that anything to suggest it's sort of growth and then it will start to flatten out the adoption rate?

Got you. Yes. So I mentioned -- I keep talking about the stars being aligned. Shane mentioned the lack of labor, right? So if we can create a product that's going to help our customer reduce the amount of installation labor. That's a good thing. Right? So that helps with some adoption. The other thing is carbon footprint, global warming potential. It's a big deal in Europe. It's becoming a big deal in the United States as well. we're getting asked these questions quite often. We've done enough research now on our products, and it suggests that we have a pretty good story to tell. This is documented research. Right? And there's a register that houses that research for us. So we know we have a good story to tell. Again, some of the other traditional materials of construction. Some day and starting they're going to have to start selecting materials based on decarbonization. So there's another new reason to specify composite materials. In the past, it was lightweight corrosion resistance, the dielectric strength, that type of thing. But now we have these other things. We have reduced the amount of labor. We have carbon footprint. Safety is a big deal. When I was working in construction, safety wasn't nearly scrutinized like it is today. And if we can supply a product that's going to be safer for installation, they're willing to put a dollar value on that. So that helps the transition as well. So it's no longer the 3 main elements. It's these other things that I mentioned that are helping convert faster. And I'm not going to underestimate the codes and standards. Whenever we develop a product and I spent the majority of my time developing the products, looking at the markets, figuring out what the market needs. And by actually picking up the phone and spending a lot of time with the customers, the people that have to install it, we really understand what kind of pain is in that process. from procurement to installation to maintenance, we take that all into consideration were developing a product. But one of the things that we do is we jump on committees. I chair committees. I'm a member ASTM. I'm a member of AMC I've turned a lot of that over to my younger engineers now. And we developed the codes and standards around the products that we developed, and we lead that, and we write them. I physically write them. I mean I have in the past. We developed a cross arm and I wrote the specification on how to test it and the specification to the engineer and say, here, right this into specifications. All my competitors have to do at least what I'm doing to supply the materials. But also from the engineering community, the early adoption takes place when you have the necessary codes and standard Shane mentioned the LRFD. That stands for load resistance factor design. If you're building a building bridge or any other structure, you guys have the Euro code. We have the LRFD code or the label stress design code. And it also references the International building code. But that's going to be a live document this will be next year now for us. And the steel industry has one, the wood industry has one, the aluminum industry has one now that we have lots. So that's going to help the adoption as well. Most engineers are very conservative people. And they don't want to put their name on the line unless they have a code that they can reference. So therefore, if there's a problem, they can say, "Hey, I did it at the code." This isn't my problem. It's the code's problem. So that's going to help us a lot as well.

And it's sponsored by ASC.

Yes, American size civil engineers who developed that, there's been at least a $1.5 million investment in that so far.

Shane, want to just touch on composites and a still live side by side.

Well, prime example, Alan touched about in the engineered solution family of Hill & Smith. We have a large group that performed very well last year that sells galvanized poles. So we have a common customer with 3 initials, AEP, one of their largest customers, one of ours. So we're not going to replace all holes. They're going to use AEP uses our materials where it makes sense. Likewise with Greg's company on the galvanized poles. So we work closely together. I would like to say I'd like to replace all galvanized. But that's not going to happen. But you've got to shoot for the stars. But we have our niches and a lot of potential, as Dustin said, on the codes and standards before we got on the plane Monday, I'm not going to tell anybody, I'm going way all our secrets here, but we're talking about huge markets that 30 years ago, you would never imagine that composites would be used them, but as Dustin said, energy efficiencies, installation savings, lightweight, longevity -- and these are major game-changing industries that even if we get a small percentage, it's just amazing that what composites can do. I mean we flew over on a Richard Branson Jet. That was all composite.

All composites. He actually worked on early on. It was in the experience actually know a lot about the aerospace that plan, I think, 70% composite. And I was going to say that Airbus is compositive airplanes as well. So the fact that, that industry has adopted composites long time.

It's amazing the automotive industry. We had a player come in, they need more capacity. I was like, why don't you just add it?" -- they said, we're good with 2 machines. We see you as the leader in urethane composites. And you get in -- I get in a Toyota or a Ford truck, I didn't know it had these parts in it. It was amazing. And the potential is there. So lightweight, installation savings and a lot of these energy decarbonization, it's going to open up huge, huge opportunities.

And maybe just one final question in terms of how saying utility pole is just an example, how does a customer buy them? Have they bought project by project, region by region? Or do they just run a sort of inventory and you supply into that inventory channel?

Yes. Just as an example of -- we have some of the agencies that we have long-term agreements. One of the ones it took 7 months, I worked with the legal expert with the group here in the U.K. It took us 7 months, but we have an agreement for a 5-year supply agreement, okay, which I had to go through all the approvals. We had last year, probably 2 other ones, long-term supply agreements. And then you have some of your other groups that are just buying purchase order to purchase order.

The gate is the engineering community utilities distributions engineers after approve your product, better. So that's first and foremost, is to get approval by the standards engineers within the utilities. And then the utilities usually tell us how they want to buy it. They either buy direct -- sometimes they want to put it in somebody else's stockyard and let them control the inventory. So sometimes the purchase orders come directly from the utilities. Sometimes they come from the distributors.

We've had a long-standing relationship with Verizon. We probably have heard of that name. So Verizon and some of these agencies will have joint shared poles, as Dustin indicated. So one of the major East Coast utility agency, we have a long-term supply agreement with them and also with Verizon, we're working. And we've had a relationship with them since 2005.

There may be a couple more questions and then you can -- everyone can get together at the back. There are a couple of -- any other questions anyone would like.

Charles [indiscernible] from HSBC. I'm just curious to know about the feedstock and the raw materials that go into all of this manufacturing security of supply competition for materials and that sort of thing.

The supply of the major feed stock items is in a much better place today than it was, I would say, 5 years ago. We work very, very closely with our major suppliers. We have those suppliers across the board on the major items. And just like when you're buying a company or selling to a customer, you want that friendship, you want that trust. So during the COVID years, we were the chosen one to make sure we were getting a tanker or resident, okay? So we work very closely you have your employees, you have your customers and you have your partners. But there's been a lot of demand. Owens Corning is adding additional capacity throughout North America and in the Far East for additional fiberglass production of their materials. You've probably heard of Owens Corning. So there's a lot of investment also by -- we deal with NEO, that's a British company. They're one of our large suppliers of the resins, whether it's a polyester and vinyl ester, but I take a lot of my time not only knocking on the customers' doors, but I spent a lot of time with the suppliers.

Shane, Justin, thank you very much.